April 2025 saw huge spikes in volatility as the Trump administration announced its global tariff agenda. Paris Pender, head of portfolio and macro credit trading at Trumid, speaks to Trader TV about the growing trends in portfolio trading, whereby desks are using the protocol for not only managing risk but executing tactical trades, and overall adoption during the highly volatile month.
Pender discusses the growing appetite he is seeing for the protocol across buy and sell-side strategies; how traders’ approach to PT trading has evolved in recent years; and what to expect in terms of the protocol’s trajectory of growth and innovations in pricing analytics.
Interview
Paris Pender Portfolio trading was amazingly resilient. There was some suspicion previously that portfolio trading was more of a fair weather protocol and something which would survive during bull markets but would retreat during a period of volatility like we saw in April. In fact, the reverse was true. April was the most extreme and protracted period of volatility that we’ve seen since COVID and portfolio trading not only did well during the period, it gained more market share than it had in previous ones. So during Q1, PT was around 10% of the market, while in April it was 12%. Frankly, this was a watershed moment for the protocol. The quoting was orderly and expected and largely in line with pricing in the rest of the market. So from the events of April, I think we can expect more good things to come.
Dan Barnes What did that look like from a liquidity picture perspective?
Paris Pender The protocol originally was used for larger strategic transactions. That’s really kind of where it was born around 10 years ago. Over the years, it quickly evolved to be used for month-end trading as well, for rebalancings and similar activities where the protocol is particularly useful and viable. Over the past few years, we’ve also seen it evolve into intra-month trading, where asset managers have started using it for daily flows, daily transactions that they need to get done. During this bout of volatility and the bout of volatility that we saw in August, the protocol was even further used for tactical purposes, which is something that we’ve only seen sparingly before. Even during some of the most volatile periods in April, we saw the protocol being used for dip buying, profit-taking, and similar types of tactical activity. Median trade sizes in PT have gone down and down, which is actually a really encouraging sign for the protocol. It means that it has entered into a more standard type of trading mix for asset managers. I mentioned a moment ago that the market share of the protocol overall is around 10 to 12%. However, the denominator of that figure includes a lot of parts of credit trading which are not relevant to customer flows. So if you take out dealer-dealer prints, you remove commercial paper and other kind of similar irrelevant parts of the denominator, you can actually see that portfolio trading is closer to 20 to 25% of customer flows, that’s a really staggering number. It’s significantly larger than I think most people expect. And if you take the residual trades, which are done off of the back of portfolio trades, so when a dealer goes and tries to trade out of their positions after that, that number goes even higher. So the protocol has really grown to encompass a very substantial part of overall credit trading, which we clearly saw in April.
Dan Barnes Now what’s been happening on the buy side and the sell side which has supported that resilience we’re seeing?
Paris Pender The most basic answer to that is investment from all sides. There’s been investment from the buy side, from the sell side, and from platforms like Trumid as well. From the buy-side, the focus has kind of largely been on analytics and has been on understanding the transactions that are being done through the portfolio trading mechanism and finding ways to get more types of flows done. I would mainly focus here, though, on the sell side of the equation. Dealers have invested heavily in the protocol, and I think that there’s a number of different reasons for that. It was clear that the protocol was going to rise, and as a result, there has been, I wouldn’t call it exactly an arms race, but something to that effect going on in the space. If you’re a dealer who isn’t in the space, you’re actually in a relatively difficult position because you’re at risk of being left behind by the broader movement in the markets. One of the specific things that has allowed the protocol to really evolve is the reoffer mechanism and reoffered network which has been developed to tackle the risk which comes from portfolio trades. So when a dealer completes a portfolio trade, they’ve taken on a potentially large amount of risk and a large number of line items that they need to trade out of effectively. If you rewind five or 10 years, mechanisms for doing that were not particularly developed. More recently, however, whether it’s with systematics, hedge funds, or even other real-money institutions, dealers have found a way to lay off the risk quickly and efficiently through these re-offer networks. And the investment in that kind of recycling mechanism has been a really important part of the story.
Dan Barnes So we’ve talked about the buy side and the sell side. What’s Trumid been doing to support this?
Paris Pender For the buy side, we’ve mostly focused on analytics to help the buy side to understand the quotes that they’re receiving back, to put them in context, both comparing across quotes that they’ve received and also comparing to the broader market. We help them to quickly identify bad levels or bonds, which are potentially not being priced well in the context of the larger portfolio trade. For dealers, we provide not only a complete ecosystem for them to quote PTs at scale and with speed, but we also provide a framework for them to stream out their re-offers to buy-side clients, for those buy-side clients to be able to consume the re- offers and engage whichever they want, whether it’s in a single name form or in a list form, and then for both sides to then, you know, proceed with the rest of their business. We aim to create a level playing field to enable both the buy side and the sell side to engage in the protocol in a productive and effective way.
Dan Barnes What are your expectations for portfolio trading going forward?
Paris Pender I expect to see from here increased utilization of the protocol now that it’s proven itself during a difficult time period. I also expect for the protocol to evolve in a number of ways, both from a protocol standpoint and also from a usage standpoint. Investors should be particularly happy with this evolution in the market because it will be easier and easier for investors to deploy capital within credit in the specific ways that they want to deploy it because portfolio trading allows them a mechanism to do so in a very granular and fine grained way. So overall, we expect a substantial amount of continued growth and expansion in the protocol.
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