Bond Connect, the platform designed to increased overseas investment in the Chinese interbank bond market, has reached daily volumes of more than $1bn (€0.9bn) as the country’s inclusion in bond indexes is expected to continue to boost participation.

The system was established on 3 July 2017 by the People’s Bank of China and the Hong Kong Monetary Authority. Investors executing Bond Connect trades can use global custodians for settlement, giving them convenient access to liquidity providers in China.

In 2017 Tradeweb Markets, the electronic marketplace for fixed income, derivatives and equities, was the first offshore trading venue to link to Bond Connect. Bloomberg connected at the start of this year.

During his panel at the Shanghai Stock Exchange Global Investors Conference today, Tradeweb's Eugene Cheung talked about our experience as the first electronic trading platform on #BondConnect, and how we help global investors streamline their access to the Chinese bond market. pic.twitter.com/Ya7be3jYt9

— Tradeweb (@Tradeweb) October 31, 2019

Li Renn Tsai, head of Asia at Tradeweb, told Markets Media that the firm’s best month for Bond Connect was August this year with an average daily volume of $1.4bn.

“In October this year average daily volume was $1.2bn, 172% more than in October 2018, and we expect healthy growth in volumes to continue,” he added.

Tsai explained that volumes have grown to more than $1bn a day as foreign investors have increased participation and China has been opening up its financial markets. Index inclusion is also a significant contributor as Chinese bonds are being included in both the Bloomberg Barclays Global Aggregate Index and the JP Morgan Emerging Markets Index.

Tradeweb’s @enricobruni reflects on the first two years of our #BondConnect platform and the key drivers behind its success. Read his blog here: https://t.co/s15YOrPNUU pic.twitter.com/rZ2vRHlAj9

— Tradeweb (@Tradeweb) July 4, 2019

Enrico Bruni, head of Europe and Asia business at Tradeweb, said in a blog in July this year that institutions from 19 different jurisdictions traded on Bond Connect since the firm joined the platform.

Bruni wrote that there is approximately $12.9 trillion outstanding in Chinese bonds but only about 2.4% of domestic debt is held by overseas investors. “However, based on the momentum and the trends we’ve seen so far, that percentage could change quickly,” he added.

He explained that an important driver of growth is the operational efficiencies that allow international investors to trade Chinese bonds using familiar, standardised, and automated protocols and workflows. Tradeweb offers its electronic multi-dealer request-for-quote mechanism for effective price discovery on Bond Connect and the allocation of block orders in Chinese yuan bonds was introduced in September last year.

Cui Wei, general manager of RMB Department at China Foreign Exchange Trade System (CFETS), said in a statement at the time: “The block trade allocation is one of three main factors for inclusion of China’s bonds into global bond indexes.”

The launch of block trades followed the China Central Depository & Clearing Co supporting real-time delivery-versus-payment on the platform.

Tsai said: “The size of block trades has increased as Tradeweb has enabled pre and post-trade transparency. Block trading is a key functionality for asset managers and as foreign participation increases, the size of block trades will rise.”

In addition Tradeweb has offered its Automated Intelligent Execution technology on Bond Connect since last year. Clients can set parameters on AiEX for trades to be automatically executed without manual intervention.

“Tradeweb is the only firm that has enabled auto-trading on Bond Connect,” added Tsai. “As the Chinese bond market matures, more investors will allocate more trading to AiEX.”

We are pleased to announce that Tradeweb is the only platform to launch dealer streaming prices and CFETS’ iDeal messaging tool for Bond Connect investors. Read more: https://t.co/vpbP99OUH0 pic.twitter.com/VCHCLhv89C

— Tradeweb (@Tradeweb) July 3, 2019

On Bond Connect’s second anniversary Tradeweb introduced new features. The connection to CFETS allowed all Bond Connect participating dealers to contribute live streaming liquidity on a disclosed basis across bonds tradable in the Chinese inter-bank market, increasing pre-trade transparency.

“We will be building features to ensure that investors trading in China have the same typical experience as in other significant bond markets,” said Tsai.

Tradeweb said in its third quarter results this month that it had set new quarterly records for average daily volume in Chinese bonds.

This morning we reported a record 3Q19 at Tradeweb with average daily volume of $815 billion and revenue ↗ 21.6% year over year.

For more information, visit: https://t.co/GkRcrpe5EM $TW pic.twitter.com/JrEmeLcVG2

— Tradeweb (@Tradeweb) November 7, 2019

Lee Olesky, chief executive of Tradeweb Markets, said in a statement:

“We set new records for trading activity in the third quarter in rates and credit derivatives, European government bonds, mortgages, European ETFs and Chinese bonds, reflecting growth from both organic initiatives at Tradeweb as well as a number of longterm secular trends.”