Listen to the latest episode of Credit Exchange with Lisa Lee
Published in London & New York
10 Queen Street Place, London
1345 Avenue of the Americas, New York
Creditflux is an
company
© Creditflux Ltd 2025. All rights reserved. Available by subscription only.
Analysis Sponsored by Entegra
Vanishing Volumes: How Dealer Pullback in SP Erodes Trading Activity and Concentrates Liquidity
by Daniel Ezra, Founder & CEO, Entegra
Declining trading volumes have deepened the divide between the largest managers and the rest
In our first article we showed how shrinking dealer balance sheets in securitized products (SP) hollowed out the backbone of market-making, with the unintended consequence being a race to the bottom in banking fees as the moat around their platforms disappeared. In this follow-up, we examine the impact of that pullback through the lens of declining trading turnover, which concentrates liquidity and widens the divide between the largest managers and the rest.
The decline in SP trading turnover is striking. Measured as trading volume divided by outstanding bonds, it has halved to around 20% since 2014, even as total outstandings have grown from roughly $2.5 trillion to more than $3.3 trillion (chart 1).
1: SP Trading Turnover vs Outstanding (Trailing 1 Yr)
Turnover in CLOs, RMBS, CMBS, and ABS has declined from ~40% in 2014 to ~23% in 2024, despite continued market growth. Combined securitized product trading (notional volumes) have declined since 2014
Sources: Entegra; FINRA; SIFMA
The decline, however, is not uniform across asset classes (chart 2, below). CLOs have maintained a low but steady share of activity, but CMBS, RMBS, and ABS have all seen pronounced drops in trading relative to their growing size. Some would argue that low turnover is simply the result of buy-and-hold investors such as banks and insurers, but the data tells a different story.
As of YE 2024, US banks and insurers together owned about $1.45 trillion, or 43% of the private label SP market. That still leaves 57% of bonds in other hands, a share large enough to support much healthier levels of trading, yet volumes continue to stagnate.
What emerges from lower turnover is a market structure defined by imbalance. Some products and issuers maintain visibility, while much of the rest struggle to attract meaningful secondary support. This is understandable: with less balance sheet available, dealers concentrate on the most liquid names and only step into less liquid areas when they already have a client.
2: Breakdown of SP Trading Turnover By Sector (Trailing 1 Yr)
CMBS, RMBS and ABS have seen a steep decline in trading volumes, while CLOs have maintained a more stable share as the market has grown
Sources: Entegra; FINRA; SIFMA
Investors mirror that behaviour, directing activity to bonds that already trade and avoiding those that do not. The result is a self-reinforcing cycle where liquidity attracts more liquidity while the rest of the sector grows increasingly isolated. Over time, prices become harder to verify, transparency fades, and confidence weakens, turning rational behaviour into structural vulnerability for credit as a whole.
In response, the industry has attempted to provide a range of solutions, but each has limits. ETFs have improved accessibility yet remain small and concentrated in CLOs, with about $35 billion in assets (less than 3% of the overall CLO market). In more mature markets, ETF penetration tends to peak around 6%, underscoring the constraints of this approach.
Electronic platforms such as Octaura, MarketAxess, and Tradeweb are making progress, but participation in private label SP remains shallow. Even in high yield, where electronic trading is far more established, volumes have plateaued at roughly 33% of the market, suggesting there may be a natural ceiling for adoption in SP as well.
Private credit has quickly positioned itself as the most recent answer to this growing issue. For many investors, it looks like a safer substitute for public credit that no longer trades with consistency or depth. But we should be cautious: risk in markets never disappears, it only changes form.
Secondary trading is the foundation of investor confidence and market resilience.
Daniel Ezra
Founder & CEO, Entegra
The irony is that private credit’s growth is itself a symptom of public market weakness, not a cure. As more capital shifts into these structures, transparency and price discovery erode, leaving investors reliant on size and reputation as signals of safety. The largest platforms then raise capital with ease, while managers without consistent secondary support struggle against the perception of weaker liquidity, regardless of performance. As overall volumes deteriorate, the gap between the largest platforms and the rest continues to widen.
But none of these substitutes address the core problem: the absence of active secondary trading. The challenge ahead is not simply that volumes are shrinking, but how trading can be rebuilt in a way that serves the entire market rather than a select few. Secondary trading is more than execution: it is the foundation of transparency, investor confidence and market resilience. When activity narrows to a select set of names, liquidity pools at the top, leaving the rest of the market thinner, less visible, and more vulnerable.
For asset managers, the impact is real: higher funding costs, weaker secondary support, and fewer tools to compete for capital. That is the hidden cost of vanishing volumes, and it falls most heavily on the buyside.
About Entegra’s Trading as a Service (TaaS)
For the first time, issuers can secure consistent secondary support for their deals at no direct cost. In the past, deal liquidity was largely at the mercy of the market, but awarding mandates to banks that partner with Entegra changes that paradigm. By embedding TaaS within their banks, arrangers facilitate daily, deal specific market-making across the life of a transaction, finally giving issuers true agency over secondary activity in their deals.
With TaaS, investors gain deeper liquidity and daily price transparency. This gives them confidence that markets will function when capital needs to move and encourages them to return as repeat buyers. For issuers, it provides the visibility needed to keep their platforms supported and discoverable well beyond a single transaction. That visibility becomes a force multiplier, allowing them to build scale, compete on equal footing, and price deals closer to the benchmarks set by the strongest names.
If you want to know more please reach out to us at info@entegra-global.com or visit our website at www.entegra-global.com.
