Extending 'Continuum of Innovation', BlackRock and Tradeweb Ally on Electronic Rates Trading

Aladdin—which is used by BlackRock, many of its competitors, and smaller managers on the buy side alike—will now provide access to Tradeweb's pricing from 40 sources via its proprietary liquidity portal, Aladdin Trading Network (ATN).

"In developing the strategy for Aladdin, and ATN more specifically, we've worked to identify the right alliances that will help clients access liquidity, and streamline the trading and execution process," says Sudhir Nair, managing director at BlackRock responsible for the buy-side giant's Aladdin business. "The difference with this move is that, whereas in the past the Aladdin community could obviously send orders out to Tradeweb and query them for quotes or pricing information, now we're bringing their information in, and integrating it into the Aladdin Trading Network dashboard directly."

Seamless UX
Tradeweb CEO Lee Olesky tells Buy-Side Technology that while this is certainly not the only integration of its kind the venue is working on, Tradeweb's ties with BlackRock reach back to its earliest days, when the money manager was one of its first clients.

"I'd characterize our work with Aladdin as a continuum of innovation, and what we're doing here is aiming for seamless user experience. Ultimately, the trading activity will still happen on Tradeweb, but with far fewer clicks," he says, adding that working with a provider the size of Aladdin—whose users also broadly overlap—adds significant benefits of scale.

The partners also agreed, according to Olesky, that this was the right time to move forward as more of the rates products involved switch to electronic trading, faster.

We're making sure we maintain our position in rates, figuring out how the business models work, what trading protocols work, and as the alliance with Aladdin shows, which integration points work, too. These seem like small steps, until you add them up. - Lee Olesky, Tradeweb

"Interest rate swaps are an area of particular tension," he explains, citing swaps' extensive regulatory overhaul. "The market hasn't quite figured that out, and we're all in a state of adjusting to the change. It's a little bit of a shock to the system, keeping in mind, too, that we've been in an incredibly challenging environment for a number of years. The full fallout of that change is hard to see when you're in the middle of it, so I think we'll need a year or more to see what really happens. At Tradeweb, we're making sure we maintain our position in rates, figuring out how the business models should work, what trading protocols work, and as the alliance with Aladdin shows, which integration points work, too. These seem like small steps, until you add them up."

The build-out, itself, is still in the early stages, and Nair says the initial focus is moving Tradeweb's data further front, with connectivity for a two-way flow.

"From a technical perspective, it involves pulling in both pricing and inventory information, which is then made available alongside the various tools on the Aladdin dashboard, so we're accounting for new data feeds flowing in that weren't previously there," he says.

External Support
In addition to rate swaps, asset classes to be covered as part of the integrated offering span a range including global government bonds, agency mortgage-backed securities (MBS), and other rates-based derivatives. And in fleshing out the shape of a deeper integration with Tradeweb, Nair says, BlackRock relied heavily on the input of its external Aladdin community members.

"We received very strong support during those consultations, incorporating user feedback, and throughout this work we've sought to ensure that every member of the Aladdin community has exactly the same access," he says.

Olesky likewise emphasizes that, throughout the integration process, both partners will continue to analyze other functions that can be improved, particularly for post-trade activities.

"The technology is important, but this always starts with the business case, first," the CEO explains. "When you have these kinds of alliances, typically—and certainly with BlackRock—the intention is for it to be basis for doing more, to gain real strategic insight, understanding what our mutual clients' issues might be, and develop ideas for new technology offerings and product offerings for a long time. It's a framework to do more, rather than, 'let's do this one thing, and move on.'"

The Bottom Line

• BlackRock and Tradeweb are in the midst of integrating Tradeweb's liquidity and pricing information for rates products directly onto the Aladdin Trading Network dashboard, extending a years-long relationship between the two mainstays in the space.

• Assets initially covered will include government bonds, MBS, and interest rate swaps, but are set to expand as more electronic trading takes hold, and future collaboration between the partners produces further opportunities to streamline services to mutual buy-side clients.