Credit in focus: A changing market and the implications for financing
30 September 2025
The ‘equitisation’ of the credit markets has corporate bonds trading more like equities. The data is clear, and we see the implications in the financing markets, says Bob Zekraus, global head of business development, securities lending at GLMX, who explores what this means for market structure and what is coming next
Image: Bob Zekraus
In the past year, we have shared views on the technology options available to the market, the value of an alternative electronic platform in the modern technology environment, and the upside potential from better trading tools which, collectively, are allowing clients to scale more efficiently.
Across the value chain, fixed income and equity financing are becoming more aligned not only in the way risk is managed and counterparties accessed, but also as relates to workflows, infrastructure, and operational readiness. Market participants are investing in the changes needed to alleviate the friction of outdated trading platforms that cannot support the current and future of short-end funding markets. Today’s financing technology demands require a multi-faceted approach — nowhere is that more clear than in corporate bond financing markets.
A virtuous cycle
We are at the end of the beginning of a virtuous cycle of liquidity in corporate bond markets. Bond ETFs, systematic market making, and portfolio trading are rewiring the corporate bond market, making it look a lot more like the US$127 trillion global equity market. This has major implications which are now showing up in financing markets.
Persistently buoyant
For those who champion fixed income markets, it is fitting. The first bond ETF was launched in 2002, the same month Steve Fosset became the first human to fly non-stop around the world in a hot-air balloon. Since then, bond ETFs have grown to manage 2 trillion in assets under management (AUM), with 75 per cent of that growth in the past 10 years. Fixed income ETFs are on track to hit US$6 trillion by 2030. As the market grows, the variety of underlying assets included in various ETF baskets has been increasing, steadily expanding beyond the mythical top 200 most liquid issuers.
Systematic success
The second leg of this virtuous cycle is systematic trading, which by definition aims to be machine-like. This requires data — as more credit is traded electronically, more structured data becomes available. This increasingly allows algorithms to enter the fray — funds can construct, experiment with and test models. When and how these models are deployed to the market for execution depends on the type of credit, available liquidity, and execution options.
Systematic market makers are now deploying these models at scale in credit. They are using the new levels of structured data to apply algorithmic trading and AI to create/redeem cycles. ETFs provide a large pool of liquidity and systematic market makers can quickly create baskets using intelligent parameters.
Moving in size
What about the underlying credit instruments? Market makers need healthy liquidity to source the underlying assets, create the baskets, and ensure there is not (too much) dislocation between the ETFs and the markets they depend on. Enter portfolio trading. Standard credit trades average US$2 million to US$5 million in size; it varies across the liquidity spectrum.
Portfolio trades average US$50 million to US$60million in size, and frequently surpass US$100 million. One hits the tape every seven seconds and volumes are above US$1 trillion annually in the US. Better electronic trading tools are allowing traders to find, negotiate, and trade on portfolios at the line item, basket, or parameter level. This provides a healthy outlet for liquidity on the underlying bonds that ETFs need and which market makers thrive on.
What is the outcome? Over the past decade, the market has seen a dramatic structural shift: in the US, electronic trading in investment-grade bonds has risen from just 10 per cent of volume in 2013 to nearly 50 per cent today, while high-yield bonds have climbed from low single digits to over 30 per cent. This broad, structural trend reflects the steady march toward transparency and efficiency.
The engine underneath
How is that large and growing market financed? There is certainly healthy and increasing participation between real money asset managers and systematic market makers, much of which is facilitated by the sell side. Tellingly, we are seeing a dramatic impact in the financing markets for credit, which indicates that banks are finding a new way to participate in and add significant value in this growing segment. Across the market, innovative sell side firms are leveraging and often aligning their financing and optimisation prowess and expertise in their repo and prime brokerage business lines.
As corporate bond trading evolves toward equity-like dynamics, securities financing infrastructures must adapt accordingly.
Three pivotal implications emerge:
1. Greater volumes in credit repo and securities lending
As bond turnover rises — especially through portfolio trades — demand for short-term financing to support settlement, hedging, and arbitrage also increases. GLMX clients currently finance over US$100 billion (average daily balance) of credit in the repo market — an exponential growth in the past year. We see similar interest in bonds in securities borrowing and lending (SBL) as prime brokers and repo desks look to cover more shorts, now 1,000s per day, up from 100s.
The increase in corporate bonds trading activity in SBL is evident. From 2020-25, S&P Global Markets Intelligence saw a 140 per cent increase in the value on loan of corporate bonds (Figure 1). Across the street, locates and borrows are managed by a ‘mirepoix’ of technology stacks and trading desks spanning repo, central funding, and prime brokerage. Those teams need better tools to find and exploit opportunities across both repo and SBL, especially in an accelerated settlement environment.
Figure 1: Corporate bonds — value on loan
Source: S&P Global Markets Intelligence
2. Lifecycle management steps to the forefront
Trade management, also known as lifecycle management, is no longer a back-office commodity function. With credit’s growing importance, lifecycle management is a critical function and a dynamic tool to manage fluctuations in cash credit portfolios. As cash credit PMs evolve positions — often responding to or taking advantage of PT-driven liquidity — banks must manage their inventory and financing positions with greater speed and precision. It is a real opportunity to leverage balance sheet advantages and the franchise power. However, it requires tools to manage events including returns, recalls, rate changes, and repricing, at scale across a wide range of counterparties.
3. Need for liquidity and engagement in credit across repo and SBL
As electronification expands liquidity beyond benchmark bonds to a wider universe, financing desks must begin sourcing securities in repo and SBL across a broader spectrum of corporate bonds — not just the most liquid or special issues — the previous ‘two-lane highway’.
Borrowers need to be able to search and view opportunities by the asset or by parameters. Similarly, lenders need to be able to see opportunities across the market — from general collateral (GC) through specials and hard to borrow (HTB) issues. This is completely unsuited to the old model, admittedly limited by outdated tools, in which large GC runs in a ladder are followed by voice and messaging to identify warm and special opportunities. The new, larger market demands targeted search and nuanced negotiation.
What happens next?
The platform that can build strong tools to find and engage with liquidity on both sides of the market will deliver a fundamentally better trading experience that will drive securities financing revenues and margins upward for those who adopt it. A strong fixed income pedigree, coupled with a scalable equity prime brokerage platform, will be useful due to the nuances of corporate and government securities and the lifecycle management demands they create.
This is no longer a ‘nice to have’. The ‘equitisation’ of the credit market demands a different approach if market participants are to remain in the game and indeed compete for market share in a rapidly growing space.
At GLMX, we are serving market participants as a technology-first platform. We have built a multi-faceted platform that has supported the growth of over 175 of the most innovative firms in the market. The nuances and complexities of the fixed income flows on GLMX today have prepared our team and our clients for the opportunities presented by the evolving financing needs of the corporate bond market, relying on precision and innovative features to bridge workflows across all asset classes.
Conclusion
Corporate bonds are moving swiftly toward equity-like market structure, driven by ETFs, systematic market makers, and portfolio trading. This shift requires not just changes in trading, but a reimagining of the securities financing infrastructure supporting repo, SBL, and counterparty networks. The future will reward those who modernise their financing architecture alongside their trading playbooks.
Across the value chain, fixed income and equity financing are becoming more aligned not only in the way risk is managed and counterparties accessed, but also as relates to workflows, infrastructure, and operational readiness. Market participants are investing in the changes needed to alleviate the friction of outdated trading platforms that cannot support the current and future of short-end funding markets. Today’s financing technology demands require a multi-faceted approach — nowhere is that more clear than in corporate bond financing markets.
A virtuous cycle
We are at the end of the beginning of a virtuous cycle of liquidity in corporate bond markets. Bond ETFs, systematic market making, and portfolio trading are rewiring the corporate bond market, making it look a lot more like the US$127 trillion global equity market. This has major implications which are now showing up in financing markets.
Persistently buoyant
For those who champion fixed income markets, it is fitting. The first bond ETF was launched in 2002, the same month Steve Fosset became the first human to fly non-stop around the world in a hot-air balloon. Since then, bond ETFs have grown to manage 2 trillion in assets under management (AUM), with 75 per cent of that growth in the past 10 years. Fixed income ETFs are on track to hit US$6 trillion by 2030. As the market grows, the variety of underlying assets included in various ETF baskets has been increasing, steadily expanding beyond the mythical top 200 most liquid issuers.
Systematic success
The second leg of this virtuous cycle is systematic trading, which by definition aims to be machine-like. This requires data — as more credit is traded electronically, more structured data becomes available. This increasingly allows algorithms to enter the fray — funds can construct, experiment with and test models. When and how these models are deployed to the market for execution depends on the type of credit, available liquidity, and execution options.
Systematic market makers are now deploying these models at scale in credit. They are using the new levels of structured data to apply algorithmic trading and AI to create/redeem cycles. ETFs provide a large pool of liquidity and systematic market makers can quickly create baskets using intelligent parameters.
Moving in size
What about the underlying credit instruments? Market makers need healthy liquidity to source the underlying assets, create the baskets, and ensure there is not (too much) dislocation between the ETFs and the markets they depend on. Enter portfolio trading. Standard credit trades average US$2 million to US$5 million in size; it varies across the liquidity spectrum.
Portfolio trades average US$50 million to US$60million in size, and frequently surpass US$100 million. One hits the tape every seven seconds and volumes are above US$1 trillion annually in the US. Better electronic trading tools are allowing traders to find, negotiate, and trade on portfolios at the line item, basket, or parameter level. This provides a healthy outlet for liquidity on the underlying bonds that ETFs need and which market makers thrive on.
What is the outcome? Over the past decade, the market has seen a dramatic structural shift: in the US, electronic trading in investment-grade bonds has risen from just 10 per cent of volume in 2013 to nearly 50 per cent today, while high-yield bonds have climbed from low single digits to over 30 per cent. This broad, structural trend reflects the steady march toward transparency and efficiency.
The engine underneath
How is that large and growing market financed? There is certainly healthy and increasing participation between real money asset managers and systematic market makers, much of which is facilitated by the sell side. Tellingly, we are seeing a dramatic impact in the financing markets for credit, which indicates that banks are finding a new way to participate in and add significant value in this growing segment. Across the market, innovative sell side firms are leveraging and often aligning their financing and optimisation prowess and expertise in their repo and prime brokerage business lines.
As corporate bond trading evolves toward equity-like dynamics, securities financing infrastructures must adapt accordingly.
Three pivotal implications emerge:
1. Greater volumes in credit repo and securities lending
As bond turnover rises — especially through portfolio trades — demand for short-term financing to support settlement, hedging, and arbitrage also increases. GLMX clients currently finance over US$100 billion (average daily balance) of credit in the repo market — an exponential growth in the past year. We see similar interest in bonds in securities borrowing and lending (SBL) as prime brokers and repo desks look to cover more shorts, now 1,000s per day, up from 100s.
The increase in corporate bonds trading activity in SBL is evident. From 2020-25, S&P Global Markets Intelligence saw a 140 per cent increase in the value on loan of corporate bonds (Figure 1). Across the street, locates and borrows are managed by a ‘mirepoix’ of technology stacks and trading desks spanning repo, central funding, and prime brokerage. Those teams need better tools to find and exploit opportunities across both repo and SBL, especially in an accelerated settlement environment.
Figure 1: Corporate bonds — value on loan
Source: S&P Global Markets Intelligence
2. Lifecycle management steps to the forefront
Trade management, also known as lifecycle management, is no longer a back-office commodity function. With credit’s growing importance, lifecycle management is a critical function and a dynamic tool to manage fluctuations in cash credit portfolios. As cash credit PMs evolve positions — often responding to or taking advantage of PT-driven liquidity — banks must manage their inventory and financing positions with greater speed and precision. It is a real opportunity to leverage balance sheet advantages and the franchise power. However, it requires tools to manage events including returns, recalls, rate changes, and repricing, at scale across a wide range of counterparties.
3. Need for liquidity and engagement in credit across repo and SBL
As electronification expands liquidity beyond benchmark bonds to a wider universe, financing desks must begin sourcing securities in repo and SBL across a broader spectrum of corporate bonds — not just the most liquid or special issues — the previous ‘two-lane highway’.
Borrowers need to be able to search and view opportunities by the asset or by parameters. Similarly, lenders need to be able to see opportunities across the market — from general collateral (GC) through specials and hard to borrow (HTB) issues. This is completely unsuited to the old model, admittedly limited by outdated tools, in which large GC runs in a ladder are followed by voice and messaging to identify warm and special opportunities. The new, larger market demands targeted search and nuanced negotiation.
What happens next?
The platform that can build strong tools to find and engage with liquidity on both sides of the market will deliver a fundamentally better trading experience that will drive securities financing revenues and margins upward for those who adopt it. A strong fixed income pedigree, coupled with a scalable equity prime brokerage platform, will be useful due to the nuances of corporate and government securities and the lifecycle management demands they create.
This is no longer a ‘nice to have’. The ‘equitisation’ of the credit market demands a different approach if market participants are to remain in the game and indeed compete for market share in a rapidly growing space.
At GLMX, we are serving market participants as a technology-first platform. We have built a multi-faceted platform that has supported the growth of over 175 of the most innovative firms in the market. The nuances and complexities of the fixed income flows on GLMX today have prepared our team and our clients for the opportunities presented by the evolving financing needs of the corporate bond market, relying on precision and innovative features to bridge workflows across all asset classes.
Conclusion
Corporate bonds are moving swiftly toward equity-like market structure, driven by ETFs, systematic market makers, and portfolio trading. This shift requires not just changes in trading, but a reimagining of the securities financing infrastructure supporting repo, SBL, and counterparty networks. The future will reward those who modernise their financing architecture alongside their trading playbooks.
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