MarketAxess is growing a pilot program that helps buy-side institutions and minority, women- and veteran-owned broker dealers more easily trade with one another in the secondary on the firm's platform.
The Diversity Dealer Initiative leverages MarketAxess' anonymous all-to-all Open Trading marketplace and provides enhanced trading connections by allowing investor clients to select a diversity dealer to intermediate an Open Trading transaction.
Since it began in November, the initiative has grown from three to 12 participating diversity dealers and facilitated $2.2 billion of volume and over 1,000 trades executed.
"For most of that pilot period, it was just a handful of clients, but that number has really started to ramp as we’ve gotten more clients and more dealers involved," said Chiqui Matthew, sales manager at MarketAxess. Initial pilot participants included Loop Capital Markets, R. Seelaus & Co., BlackRock, Inc. and AllianceBernstein L.P. but has grown to include Cabrera Capital Markets, LLC and Samuel A Ramirez & Co., Inc., among others.
MarketAxess saw an opportunity to both help buy-side clients meet certain investment mandates and diversity dealer participants to compete in an opaque and competitive, over-the-counter market.
“It really was a persistent challenge for [diversity dealers] because it is so competitive in fixed-income — it’s over the counter, the larger dealers dominate — it’s a challenge for regional and minority and women-owned businesses to compete for institutional flow," Matthew said. “The positive effects are the more institutional flow that the diversity dealers participate in, which ultimately make them better equipped to compete” more broadly.
Annie Seelaus, chief executive officer of R. Seelaus & Co., said in a release that expanding market access for women-led organizations "is a challenge, one that is only possible to overcome with thoughtful use of technology. I'm thrilled to be working with MarketAxess on the Diversity Dealer Initiative, raising the visibility of our market making capabilities with an extensive network of participants."
For MarketAxess’ buy-side clients, the initiative made sense to solve for certain environmental, social and governance and investment mandate challenges.
Some of their clients that manage money for pension funds or state funds have explicit mandates for a certain percentage of that fund to transact with a minority or women-owned business. They also have ESG priorities or diversity focuses on the organizational level.
For the buy-side, the initiative "doesn’t just solve for that client mandate, it also solves for their desire to grow and participate more actively in secondary trading," according to MarketAxess.
"As a fiduciary on behalf of clients, BlackRock is committed to cultivating and advancing diversity in all forms across our organization and in the markets that we serve," said Dan Veiner, global head of fixed income trading. "Trading initiatives that provide broader access to opportunities will meaningfully contribute to the growth of participating diverse broker businesses."
The program covers all fixed-income, high grade, high-yield and both exempt and taxable munis.
The current plan is to expand the program to every product in MarketAxess’ Open Trading network.
“That’s really the foundation of this marketplace — we are leveraging that connective tissue to support the diversity initiative," Chiqui said.
"For the diversity dealers themselves, they’re really given voice to those persisting challenges of trying to compete with flow without a ton of capital to work with," Matthew said. "The institutional flow access, to see that trade information that will hopefully allow them to compete even more."
MarketAxess' Open Trading network of institutional participants delivered over 29,000 orders and $15 billion notional value available through the central marketplace on average per day in the second quarter of 2021.
“When we launched Open Trading, the idea was to create a more transparent, inclusive market for fixed income," Matthew said. “If we’re going to be the biggest all-to-all, we want all to be able to participate.”
