Bloomberg expands Australian EFP trading for bonds

Bloomberg has expanded its Exchange-for-Physical trading workflow for the Australian fixed income market. The first transaction on the system involved HESTA and ANZ.

The trade was completed through Bloomberg Electronic Markets, with HESTA participating in the inaugural deal and ANZ acting as market maker.

Exchange-for-Physical, or EFP, trading is used in Australian fixed-income markets to link a bond trade with a corresponding futures leg, so both can be executed together as a single package. Market participants use the structure to reduce execution risk when managing portfolios and adjusting bond exposures against benchmark futures.

Bloomberg's updated workflow supports contingent package trading for Australian bonds against a benchmark Australian bond futures contract via an electronic negotiation process. It also includes straight-through processing and integration with order management systems for Requests for Quote and Requests for Market.

For investors active in domestic debt markets, the move brings a market convention that has often relied on voice trading or manual handling into a more standardised electronic workflow. It also reflects a broader push by trading venues and data providers to embed more fixed-income processes into connected systems rather than split execution and post-trade steps.

Sonya Sawtell-Rickson, Chief Investment Officer at HESTA, said the trade type is central to the fund's investment process.

"Exchange-for-Physical trades are important to the functioning of the Australian Debt Capital Markets and a core part of our portfolio management," Sawtell-Rickson said.

"It is encouraging to see Bloomberg supporting core elements of Australian Debt Capital Market infrastructure."

She also linked the workflow to cost and risk management for retirement savings.

"This represents a significant step forward for Australia's fixed income market construction, and we're pleased to see support for a protocol that helps reduce transaction costs and execution risk for market participants. This ultimately supports our focus on carefully managing our members' retirement savings," Sawtell-Rickson said.

ANZ acted as market maker in the first transaction, underscoring dealer support for the model as buy-side firms adopt electronic tools for package trades in rates markets.

"EFP trades are a key feature of Australian fixed income markets and an important tool for managing risk. ANZ is pleased to be involved in this inaugural trade, demonstrating our strong support for and investment in new digital ways of trading fixed-income products. By taking a holistic view of our customers' needs, we deliver tailored solutions that help them achieve their strategic goals," said Glenn Blackley, Deputy Head of Markets and Head of Rates & Credit, Australia, at ANZ.

Market shift

Electronic trading has expanded steadily across fixed income markets, but package trades and other complex instruments have often moved more slowly than outright bond dealing. In Australia, where bond futures are an established part of institutional risk management, linking the cash bond and futures legs in a single negotiated transaction is routine trading desk activity.

The new workflow reflects Australia's growing importance in global rates trading and the rising demand from investors for local-market tools that fit into broader multi-asset and cross-border trading systems. Providers have been working to make those systems more consistent across regions so clients can manage execution, compliance and processing through the same infrastructure.

Bloomberg's electronic markets business operates across more than 175 markets globally and serves more than 9,000 client firms, according to the company. It also connects users with more than 1,500 dealers across asset classes.

Nicholas Bean, Global Head of Electronic Markets at Bloomberg, said the Australian enhancement is part of a wider regional effort.

"Australia is playing an increasingly important role in global capital markets, underpinned by a highly sophisticated and engaged participant base. The expansion of our EFP trading solution marks a significant step forward in our ongoing investment in our offering for our clients in the region," Bean said.

"Clients are looking for a trusted and strategic technology partner, and we work closely with them as we develop innovative solutions that enhance liquidity access and deliver sophisticated trading workflows both locally and globally."

Australian EFP trades are negotiated via Bloomberg Tradebook Singapore, according to the company. The first completed transaction offers an early test of whether a market structure long embedded in domestic fixed-income trading can move more fully into electronic execution without sacrificing the flexibility institutional investors and dealers require.