Emerging Markets Swaps: From Fragmented Liquidity to Systematic Scale

Emerging markets (EM) swaps trading has undergone structural transformation over the past five years. What was once predominantly voice and relationship-driven flow has steadily become electronic, systematic and scalable.

The data clearly illustrates this shift. In Q1 2021, Tradeweb executed approximately $250bn in EM swaps, representing 4.6% of cleared CCP volumes. By Q4 2025, quarterly volumes had grown to over $3.5tn, with Tradeweb's cleared market share rising to 23.7%. (Source: Clarus)

While this growth reflects change in both market conditions and structure, it's clear that EM swaps trading is becoming is becoming more electronic.

What's driving growth in EM Swaps?

Several foundational developments have supported this expansion. Firstly, the deepening of liquidity. As we've now onboarded over 25 global and local liquidity providers on Tradeweb, we've broadened access across currencies and tenors. Secondly, by adding more EM currencies to our platform - the most recent being the Malaysian Ringgit in 2025 - we're helping to consolidate previously fragmented liquidity pools and enabling more consistent price formation.

Thirdly, from a functionality perspective, the widely adopted use of the request-for-market (RFM) protocol and a noticeable increase in the adoption of automation, have been key enablers of growth in EM swaps.

RFM: Strategic execution without signalling risk

A key challenge in less liquid markets is the lack of information on the market's exact position at a given time. RFM addresses this by allowing clients to mask the direction of their trade and receive a two-way price for their order. This means participants can establish executable transaction costs before committing to a trade.

Shifting gear with automation

The rise of automation has been evident - particularly among systematic hedge funds. As systematics have scaled their EM allocations and embedded automation within their strategies, electronic volumes have followed.

Systematics broadly require three things to deploy capital efficiently in EM swaps:

1. disciplined, repeatable execution,
2. control over transaction costs, and
3. protection against information leakage.

Automation supports all three.

Tradeweb's automation solution, Automated Intelligent Execution (AiEX), allows clients to apply execution logic directly into their trading processes. With over 100 parameters, rules can be configured around transaction cost thresholds, slippage tolerances, dealer selection, size, timing, amongst other factors. The ability to optimise protocols and dealer selection through AiEX allows clients to take charge of who they're trading with, how they're trading with them and when they are executing the trade - it's about finding the right liquidity with the right tools at the right time. Once deployed, strategies execute within a fully auditable environment, which is an ever more important requirement for institutional governance.

When RFM meets automation

By bringing two of the most powerful trading tools in EM swaps together, clients can refine their trading strategies even further. When integrated into an automated framework, RFM becomes particularly impactful. Clients can:

• predefine maximum transaction cost limits,
• set slippage tolerances,
• specify a minimum number of dealer responses, and
• keep quotes live for a defined time window.

Tackling this process manually is a significant challenge. Automation simplifies it by reducing delays without moving the market and helping traders secure a consistent trading strategy. It allows clients to lock a transaction cost within a structured, rules-based workflow - even in less transparent markets. For systematic hedge funds, this capability is critical: it supports strategic trading decisions without compromising confidentiality.

When timing is everything

In global fixed income markets, and particularly in EM where liquidity is episodic and local trading hours differ materially across regions, timing can be as important as price. An increasingly popular feature amongst our EM clients, is AiEX's time release. It can help clients capture depth of liquidity when they emerge and allow them to align their execution with market peaks.

With time release, clients pre-specify the exact time at which an order is released to the market, triggering an RFQ and executing at the best available price without requiring traders to be active in every time zone themselves. By staging RFQs at optimal points in the trading day, clients can interact with discrete liquidity pools more effectively while maintaining control through pre-defined execution parameters.

When combined with RFM and other automation parameters, this approach enables clients to control signalling risk, manage slippage and enforce transaction cost thresholds at each stage of execution. For systematics in particular, time release introduces a structured way to access liquidity in markets that were once logistically challenging to trade efficiently.

A structural shift in EM swaps

The growth in EM swaps is not simply cyclical - it reflects a structural shift in how these markets are accessed and traded. Clients now approach trading EM swaps with the same precision and discipline applied in developed markets, where granular rule-setting, transaction cost control and minimised information leakage are baseline expectations rather than considered enhancements.

Rising volumes and increased cleared market share tells the quantitative story, where the qualitative story is about evolution - new currencies, broader liquidity provision, new participants and higher execution standards. What began as the digitisation of voice workflows has matured into systematic, rules-driven execution at scale. As automation continues to expand and liquidity deepens, EM swaps are set to remain one of the most dynamic segments of global rates markets - not because they are emerging, but because they are evolving and offer participants many opportunities.