Electronic trading proves its strength in times of volatility

April’s volatility confirmed that electronic trading platforms are not just part of capital markets, but central to their functioning.

Just like smart devices have transformed how we live at home, electronic trading platforms have reshaped how risk is being transferred in financial markets.

Today, they are an indispensable part of the financial services ecosystem, as they provide investors with greater efficiency, flexibility and scalability.

Despite the advantages of electronic trading being well established, there are still certain pockets of the market that continue to rely on voice execution. This is primarily due to legacy practices and relationship-driven dynamics, which become more pronounced during times constrained by market volatility and the geopolitical backdrop.

However, traders should approach electronic platforms with confidence regardless of the market environment. The volatility witnessed earlier this year around the US global trade tariffs announcement served as a fresh proof point that digital workflows are dependable, adaptive and effective when conditions turn turbulent.

For those still relying on voice-based trading, the recent market episode offered a compelling case study in how e-trading protocols can support stability, speed, and execution certainty.

Back to the basics – why electronic trading?
Similar to a search engine, electronic trading connects buyers and sellers of financial instruments on a single user interface. Integration with firms’ order management systems (OMS) and vendor systems, including clearinghouses, confirmation systems and other third-party service providers, boosts efficiency across front-, middle- and back-offices, allowing for the opportunity to adopt end-to-end straight-through processing.

Electronic trading also offers buy-side traders a more complete picture of pre-trade liquidity, and allows them to make better informed decisions, identify the right counterparty for each transaction and achieve more competitive pricing.

Electronic platforms and solutions are able to automate and integrate key parts of the trading process, which in turn helps traders improve their execution quality; manage risk and compliance thanks to available audit trails of the entire trade lifecycle; and access transaction cost analysis that can help them improve their performance.

What’s more, electronic trading protocols can cater to a trader’s execution preferences and different market conditions. There are protocols that allow investors to send simultaneous requests for quotes to multiple dealers enabling greater competition, or auction-like protocols with the option to ask for a two-way market to avoid alerting the market to your trading strategy.

Then there’s automated trading, which allows investors to pre-program the release of orders into the market, and portfolio trading, where investors can put together a basket of bonds and trade them all together as a single package deal. Collectively, these innovations offer market participants greater flexibility, precision, and efficiency in managing complex trading objectives.

Volatility reinforces the case for electronic trading
Historically, during periods of extreme market volatility, we would expect to see a retreat from electronic execution in favour of the perceived comfort of the phone.

However, this was not the case when global markets roiled in response to ‘Liberation Day’. Instead of reverting to manual methods, institutional investors remained active on electronic platforms.

As the Volatility Index (VIX) surged more than three times beyond its 30-day average over the course of April, there was growing investor demand for exchange-traded funds (ETFs) as a way to reposition their risk profiles. Some e-trading marketplaces witnessed record monthly volumes as a result of this shift, with the US and Europe experiencing high double-digit growth.

At the same time in Asia, e-trading platforms saw US dollar interest rate swap volumes rise, whilst activity in Japanese, Australian, and New Zealand swaps remained robust, as investors positioned themselves for potential rate cuts in the US.

What’s more, investors are ramping up their automated trading strategies to help navigate turbulent environments with greater precision and efficiency.

Automated and rules-based trading tools reduce the need for manual intervention and provide investors with a greater degree of consistency that can be crucial during uncertain periods. During April’s volatility spike, usage of such automated execution solutions notably increased, enabling market participants to remain agile and keep trades moving even under stress.

The broader adoption of automation is not only a consequence of higher volatility, but also part of a larger shift toward operational efficiency and scalability across asset classes. Whether during periods of market calm or turbulence, the integration of technology into trading workflows is becoming an essential part of the institutional playbook.

The new normal is digital
April’s volatility confirmed that electronic trading platforms are not just part of capital markets, but central to their functioning. More market participants than ever before are comfortable navigating turmoil with electronic and automated tools, either maintaining a ‘business-as-usual’ approach, or even ramping up their trading strategies.

As volatility becomes a recurring feature of modern markets, we expect to see more and more participants, even those more resistant, putting their confidence in electronic trading to deliver faster execution, greater transparency, and reliable outcomes when they’re needed most.