Quant Firm Man Numeric Aims to Go 100% Electronic for Credit Trades By 2025

An electronic trading revolution is finally coming to corporate bonds, years after reaching other financial markets.

That’s what Man Numeric, a quant investment arm of the world’s largest publicly listed hedge fund manager, believes. The firm is executing 90% of its high-yield and investment-grade trades through digital platforms, and expects to get to 100% within two years. A year ago, only about a third of its junk bond trades were electronic, with the rest happening on the telephone or a messaging platform.

The money manager’s shift shows how electronic platforms are making real inroads in a corporate bond market that has long been dominated by investors and banks calling one another to trade. Across the high-grade market, about 40% of trades are online, up from less than a tenth a decade ago, according to research firm Coalition Greenwich.

Man Numeric has noticed a key shift in electronic trading in just the last two years. Corporate bond traders have long clung to the telephone because most bonds change hands infrequently. An asset manager that needs to sell notes might call a dealer that in turn needs to find a buyer, and may have to telephone dozens of other firms to find one.

During times of turmoil, voice trading has often won out for the biggest trades, even as recently as the early part of the pandemic in 2020. But in the last few years, Man Numeric has noticed that trading volume on electronic platforms was growing in both bad times and in good, said Robert Lam, co-head of credit at Man Numeric. More investors seem comfortable using fully electronic trading, in part because they have more sophisticated pricing algorithms that can handle big market shifts.