ION has launched a service to enable its fixed income trading clients to access new debt futures markets more easily.

The technology firm has integrated its bond trading front end with its futures platform XTP Execution so fixed income traders get easy access to a range of derivatives markets.

Tommaso Di Grazia, head of Fixed Income Product Development at ION Markets, said the idea was to make the two ecosystems work together in an integrated way.

“On the futures side, XTP Execution, or XTPE (formerly called Fidessa) offered a large network of futures exchange connectivity through brokers. This allows you to trade futures and options without bearing the fixed costs of infrastructure and membership.”

Di Grazia added: “On the fixed income side, there was the traditional way of accessing exchanges which was as a member with your own infrastructure and network. We wanted to create synergies by allowing fixed income desks to use XTPE to route orders and receive market data for those exchanges where the client doesn’t have a strong presence or volume.”

The thinking is that trading clients will retain memberships of their key markets and use this service to trade new products avoiding the cost associated with becoming a full member.

“With this approach, clients will continue to be present with their own name on core exchanges. At the same time, for exotic or non-core exchanges they can access all liquidity while avoiding the full cost of onboarding and infrastructure,” said Di Grazia.

“There is a need to trade different exchanges but the client might not want to enter a specific exchange because the barriers are too high so if you lower the barrier by lowering the costs, those needs can be satisfied.”

Time to market is another advantage of this approach, the ION director said. “Clients also gain speed in testing liquidity in new markets. You can now easily access connectivity through different channels, which they wouldn’t do in the traditional way because it is too expensive for the quantity of business that they’ll do - hooking up very quickly. At the same time, if you see that it’s not working, you can also drop them very quickly.”

CME Group launched on June 17 three futures contracts based on Bloomberg fixed income indices, offering exposure to investment grade and high yield US dollar corporate debt. And the US group said last week the futures had made a solid start, trading 415 lots in their first few days.

"In just one week since launch, our credit futures are generating strong trading activity as clients turn to more capital efficient ways to manage their duration risk and US credit exposure," said CME global head of rates and over the counter (OTC) products Agha Mirza.

Also on June 17, Cboe Global Markets launched iBoxx $ Emerging Market Bond Index (IEMD) futures, adding to the US group’s existing US corporate bond futures and options on futures complex. The contracts are based on the equivalent S&P Dow Jones index of sovereign and sub-sovereign names across 46 emerging market countries

Rob Hocking, senior vice president and head of product innovation at Cboe, said in May: “Whether investors or fund managers are looking to hedge current positions or gain broad exposure to the market for bonds issued by governments or sub-sovereign issuers from emerging market countries, IEMD futures are designed to provide that exposure in a US regulated and capital efficient manner.”

Di Grazia said there is strong demand for fixed income exchange-traded fund options: “We have also seen growing interest in ETFs coupled with portfolio trading which is a growing trend in the credit space.”