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Tradeweb Markets President on 'how the electronic world has risen inside of fixed income'

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Yahoo Finance’s Myles Udland, Julie Hyman, and Brian Sozzi speak with Tradeweb Markets President, Billy Hult, about the electronic shift in bond markets forced by COVID-19.

Video Transcript

MYLES UDLAND: All right, let's stay on topic of markets thinking about the role of retail and talk a little bit more about what's happening on the fixed income side as well. Billy Hult joins us now. He is the Markets President over at Tradeweb. Billy, it's great to talk with you this morning. I'd love to begin by just asking about the role that retail plays in the market as far as you guys see it, and how that's changed for your platform in the last year. How that conversation has changed with folks you know in the industry who saw it going one way for a long time. And now it's really been quite an interesting year.

BILLY HULT: I was-- Happy Friday, guys. I was listening to how you guys were describing yesterday. And I was watching along with you guys. It was absolutely riveting television. And I would say that I agree who the hero of the day was. The kind of I am not a cat moment, I think, is a moment that we all have now seared in our brain. It was just kind of television day. And you guys covered it great.

It was a fun afternoon to watch what was happening. The fixed income market has always traditionally been an institutional market. So Tradeweb lives and breathes in the institutional market. We're really in the network business of connecting the biggest buy side clients, the pension funds, the hedge funds, the asset managers, the central banks into the biggest banks, the market makers, JPMorgan, Goldman Sachs, Morgan Stanley, et cetera, across all the big liquid areas of fixed income from on the run government bonds to high yield credit, ETFs, global derivatives. We're in all of that game.

And it's been an incredibly interesting year for us, in part because the markets are super interesting, obviously around volatility before and after the election, obviously everything that happened in March was a huge deal around how the bond market was functioning. And now you have all this big, heavy issuance happening in both credit and government bonds. And oh by the way, work from home has changed everything. So I grew up-- I'm a little bit older than you guys-- I grew up reading "Liar's Poker." So I grew up as a bond guy.

And I always knew the sort of bond market as these big kind of characters historically at all of these banks It's a Friday morning. It would be on a Friday morning. It would be hamburgers at 10 o'clock. And these were big, forceful personalities. And it's amazing to see how the electronic world has risen inside of fixed income. And it's a really big moment for us as a company.

BRIAN SOZZI: Well, now we have no time, Billy, to eat hamburgers during the session because things are moving so fast. But well let me get your thoughts on real time trade settlement. Is that going to be a thing? How heavy a lift would that be?

BILLY HULT: You know, in fixed income, I think the fixed income market operates really well in terms of how that settlement process works, particularly in the liquid areas or on government bonds. I think we've had that sort of the plumbing around all of that nailed. I have learned one thing this year. And I think you guys know this really well, which is basically, anything can happen. And we're always going to try to get to the best answer around all of this stuff. The one thing I was thinking about yesterday as I was watching, was just really understanding the plumbing of how these markets work is really, really important. And also articulating the plumbing is really, really important.

So the operating of fixed income has worked traditionally really, really well. That being said, we all know anything can happen and we're going to stay very focused on making sure it continues to operate very well.

JULIE HYMAN: Billy, Julie here. I want to ask about something that this is all, that we've been talking a lot about and that this is a reflection of, is increased risk taking in the market. And I am curious about that on the fixed income side. And one example, maybe, of that is that MicroStrategy convertible debt offering that we saw. Earlier in the week, they had to upsize from $600 million to $900 million with basically a way for fixed income investors potentially to play crypto. And I'm curious if that is emblematic of this reaching that we're getting in all sectors of the market for yield, for return, and whether there is any risk in that.

BILLY HULT: It could be. It's a great question. I mean, I think that we're all trying to figure out on some level where the yield curve is going. Is there a moment in time where the right trade becomes around shorting interest rates? Obviously-- and you guys cover this extremely well-- the rise of Bitcoin is a part of all of this. What is Bitcoin? Is it an asset class or not? Is it correlated to the market or not?

I think the participants, especially on the retail side, are getting more and more sophisticated. And I think that's one of the things, quite honestly, that came out yesterday, was just the level of sophistication has risen. And I think ultimately, that sophistication is going to connect more into fixed income. And so we'll see more of that going forward. It's a great question though.

MYLES UDLAND: You know, Billy, I want to ask a bit about, and you mentioned the old trading floor, the "Liar's Poker" vibe. I remember my dad was doing-- the community put something-- back in the '90s. It was a whole thing. Seemed very cool. But that's not coming back.

BILLY HULT: On the 80s, but it's OK. Yeah.

MYLES UDLAND: Yeah, William Simon back in the day. Anyway, so that whole thing was very fun. But that's over. Do you think that working from home during COVID-- I know a lot of banks have brought people back to the floor, but has that even further accelerated the distribution of trading teams geographically? Because certainly things have worked OK for the most part with a hybrid setup, only a couple of guys in the office. And is this going to make big institutional firms rethink their physical footprint, especially with a platform like yours, enabling that digital trading as well.

BILLY HULT: Yeah, there's no question. It's a great point. Look, those days are over. You're right about that. That being said, the business still stays, I think, in a really good way, relationship based. So the relationship component to fixed income trading is really, really important. That being said, the work from home environment has absolutely accelerated, ultimately, the electronification of these markets. And there's no going back. So let's start there and understand that.

My general instinct is, New York City is always going to be a major player around how these markets operate. It's been a rough year for New York. We all know that really well. But it's where the action has historically always been. My general instinct is, New York's always going to play a very large role around the marketplaces. And I think the big banks and all the major players will continue to have a big presence in New York. That's my hope. I'm a New Yorker. I love this city and I want it back to where it was.

MYLES UDLAND: I think we can all agree on that as we sit here, distributed across the New York metro area. All right, Billy Hult, President at Tradeweb Market. Billy, really great to get some time with you this morning. I hope we can talk soon.

BILLY HULT: You guys are great. Thanks very much for having me on.