Bloomberg explored the ways in which the COVID-19 pandemic and market volatility has impacted banks and broker-dealers.
Bloomberg explored the ways in which the COVID-19 pandemic and market volatility have impacted banks and broker-dealers. We aimed to discover how we can better support the sell side during and after COVID-19. This research focuses on three main areas:
Bloomberg surveyed 499 financial professionals who work on the sell-side at the end of July 2020. Nearly all who completed the anonymous online survey were Bloomberg customers. The survey's regional representation had 32% coming from the U.S. and Canada; 31% from Europe, the Middle East and Africa; 24% from the Asia-Pacific region; and 14% from Latin America. Most of the participants worked for investment banks (43%) or commercial banks (30%). The vast majority of respondents were either traders (39%) or worked in sales roles (38%).
Most worked with at least two asset classes. Average respondents worked with three. Fixed income, currency and rates were the three most common asset classes.
The majority of sell-side professionals have made some changes in their methods of trade execution. Since the pandemic, more traders are using Bloomberg's IB chat function, with fewer trading by phone. More than half of sell-side front offices report a change in average trade size, with most of that group increasing their trade size. A mix of small and large trades were made due to market volatility. Sales and trading professionals who deal with credit derivatives and interest rate swaps were more likely to report larger trades than other respondents.
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Two-thirds of respondents expect their firms to accelerate the shift to electronic trading, particularly over the next two years. Most of the remaining one-third expect to revert to the same level of electronic trading they had pre-pandemic, which they estimate could take up to a year on average.
Electronic trading is edging up during the pandemic and remains a priority at 96% of these sell-side firms.
Financial professionals cited tools they have at home, as well as compliance and security concerns, as the main drivers for changing how they trade.
In general, most sell-side firms that prioritized electronic trading pre-COVID-19 have continued to do so. Some firms who said electronic trading was only a factor in their operations have escalated its prioritization, but the majority have maintained their current activity level. No single factor explains the changes in the use of electronic trading. Tools available at home, compliance/channel security and market volatility were named as the key drivers of change.
The virus impacted markets and also firms, resulting in these changes to automated trading. Only 14% of respondents say that it is not a factor in their operations, compared with 18% pre-COVID-19, while more firms that thought of automated trading as just a factor in their operations are now prioritizing it.
The survey also found the three factors that best explain the uptick in automated trading: tools available at home, market volatility, and compliance and channel security.
In general, most firms expect to accelerate their shift to automated trading over the next two years. Those anticipating a return to pre-COVID-19 levels of automated trading expect to do it more quickly and in half the time.
Most sales and trading staff are working from home during this time, particularly in the Americas. Roughly half of the people surveyed have changed their average trade size, with more in the group increasing the size of their transactions rather than decreasing transaction size. More of the sell side are using IB and other chat tools to trade, and fewer are conducting trades over the phone in this new environment.
As the pandemic continues to impact markets, Bloomberg will continue to serve its customers better through more integration with their proprietary systems, third-party applications and improved terminal functionality. Since the start of the pandemic, remote working features from our terminal and Order Management solutions have been further improved and responses to market requirements in these volatile times have been swift. COVID-19 may have changed how sell-side traders use their tools, but not Bloomberg's commitment to making their lives easier.
