While the fixed-income market has trillion in assets, only a fraction of bond securities change hands on any given day. Recently, BlackRock has partnered with Tradeweb in an attempt to boost the efficiency and liquidity in fixed-income exchange traded funds.

Enrico Bruni, head of the Europe and Asia business at Tradeweb, said the new tool will help source, price and trade the basket of underlying bonds to create or redeem units of fixed-income ETFs in European markets, reports Chris Flood for Financial Times.

“This tool will help to increase efficiency and liquidity for fixed income ETFs across Europe in support of continued market growth,” Leland Clemons, head of capital markets Emea at iShares, said in the article.

ETFs are comprised of a basket of underlying securities. Authorized participants help create or redeem ETF shares by swapping a basket of underlying securities for a unit of ETFs or vice versa.

Since the underlying indices of bond ETFs are often comprised of hundreds if not thousands of component holdings, it is expensive to acquire all of the underlying bonds to process a creation order. The Tradeweb’s new initiative would be a “useful tool” to source the required bonds for a fixed income ETF order.

“Feedback generally has been very positive and we have added more buyside clients and dealers,” Bruni said in the article.

For more information on the ETF industry, visit our current affairs category.

Max Chen contributed to this article.

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