Q2 SCOOS Ad Hoc Questions

2025: Q2 SCOOS – June 2025

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Special Questions on Portfolio Trading in Corporate Credit Markets

Portfolio trading in corporate credit involves trading a basket of corporate credit instruments in a single transaction. This type of trading has reportedly experienced considerable growth over the last few years. In questions 81 through 92, we ask about changes in the prevalence of credit portfolio trading since January 2023 and drivers behind such changes, as well as various aspects of portfolio trading and its implications for credit market functioning.

81. Does your institution engage in credit portfolio trading?

1. Yes

2. No

82. Since January 2023, how has your firm’s provision of credit portfolio trading services to clients changed as a share of the firm’s total secondary-market transactions in corporate credit?

1. Increased considerably

2. Increased somewhat

3. Remained basically unchanged

4. Decreased somewhat

5. Decreased considerably

6. Not applicable

83. If you indicated in your response to question 82 that your firm’s provision of credit portfolio trading services has increased since January 2023 (as reflected in your choice of options 1 or 2 ), how important has each of the following factors been in supporting the increase (please rank each factor using the following scale1 = very important, 2 = somewhat important, or 3= not important)?

1. Increased demand from clients for portfolio trading

2. Technology advancements, allowing for efficient pricing and trading of large portfolios

3. Growth of corporate credit exchange traded funds (ETFs), making it easier to hedge and offload portfolio trades

4. Better pricing data and improvements in price transparency

5. Competition pressure

6. Other (please specify)

84. How would you characterize the use of credit portfolio trading by clients of each of the following type. (Please use the following scale: 1 = Widely used by a large number of clients, 2 = Used by some clients, 3 = Used by only a few clients, 4 = Used to a minimal extent by clients, or 5 = Not used by clients.)?

1. Insurance companies

2. Pension funds and endowments

3. Mutual funds

4. Hedge funds

5. ETF managers

6. Separately managed accounts (SMA)

7. Other asset managers (please specify)

85. How frequently is each of the following credit instruments used in credit portfolio trades? Please use the following scale for each instrument: 1 = Frequently used, 2 = Used only in a few situations, 3 = Rarely used, or 4= Not used.

1. High-grade corporate bonds

2. High-yield corporate bonds

3. Leveraged loans

4. Municipal bonds

5. Structured credit products

6. Other credit instruments (please specify)

86. In your view, what are the most important implications of market-wide changes in portfolio trading activity for the liquidity and functioning of corporate credit markets since January 2023?

1. Portfolio trading led to significant improvements in credit market liquidity and functioning.

2. Portfolio trading led to some improvements in credit market liquidity and functioning.

3. Portfolio trading led to no improvements in credit market liquidity and functioning.

4. Portfolio trading led to some worsening in credit market liquidity and functioning.

5. Portfolio trading led to significant worsening in credit market liquidity and functioning.

87. What are the most important factors in determining your firm’s decisions on whether to take on a portfolio trade (please rank each factor using the following scale1 = very important, 2 = somewhat important, or 3= not important)?

1. Relationship with the client

2. Balance sheet availability

3. Market conditions

4. Composition of bonds in a basket

5. Other (please specify)

88. What are the most important methods for distributing bonds purchased through portfolio trades (please rank each factor using the following scale1 = very important, 2 = somewhat important, or 3= not important)?

1. Electronic trading (including algorithmic trading)

2. Cash bond trading

3. ETF creation and redemption

4. Other (please specify)

89. How is your firm's willingness to engage in portfolio trades affected by your ability to create or redeem baskets as an authorized participant in credit ETFs?

1. The firm only trades portfolios for which almost all constituent credits make up ETF creation or redemption baskets.

2. The firm sometimes trades portfolios with a significant fraction of constituent credits not found in ETF creation or redemption baskets.

3. The firm frequently trades portfolios with a significant fraction of constituent credits not found in ETF creation or redemption baskets.

4. The firm is not an active authorized participant in credit ETFs.

90. To the extent that your firm engages in portfolio trading in credit instruments that do not make up ETF creation and redemption baskets, how do you manage risks associated with such trades? Please use the following scale to assess the options below: 1 = Frequently used, 2 = Used only in a few situations, 3 = Rarely used, or 4= Not used.

1. The firm hedges credit portfolio trades with credit ETFs.

2. The firm uses CDS indexes in hedging.

3. The firm uses credit futures in hedging.

4. The firm hedges credit portfolio trades with credit ETF options.

5. The firms prearranges offsetting trades.

6. Other (please specify).

91. How did your firm’s willingness and ability to engage in portfolio trading change during the period of market turmoil in April 2025 (relative to willingness to make markets for individual credit instruments)?

1. Decrease substantially

2. Decrease somewhat

3. Does not change

4. Increase somewhat

5. Increase substantially

92. Looking ahead, how do you anticipate your institution’s involvement in credit portfolio trading services will evolve over the next 12 months/year?

1. Increase considerably

2. Increase somewhat

3. Remain basically unchanged

4. Decrease somewhat

5. Decrease considerably

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