5 Years of LuxXPrime: An interview with LuxSE & EUWAX AG

To celebrate the 5th anniversary of the launch of LuxXPrime, we sat down with LuxSE's Head of Markets & Surveillance, Guy Weymeschkirch and EUWAX AG's Head of Fixed Income, Jens Furkert to discuss how the retail-sized bond trading window has evolved since 2019, and what lies ahead for the broader bond market in 2025.

Guy, it’s been 5 years now since the launch of LuxXPrime. Can you elaborate on the primary motivations that led to its establishment?

Guy: As the world’s leading exchange for the listing of international debt securities, we wanted to improve our trading offering and more importantly, address the gap in the market for fixed income instruments. This is why we launched LuxXPrime in September 2019. Our goal was to offer a new trading service that simply wasn’t available before. We wanted to create a transparent, secure, and efficient marketplace where investors could access real-time information and execute their trading strategies instantly.

A key part of our vision was providing full pre- and post-trade transparency through a Central Limit Order Book. This allowed us to open participation to a broader range of investors, including asset managers, family offices, private bankers, and retail investors.

Another driving factor behind the launch of LuxXPrime was to give banks and brokers the ability to execute smaller-sized bond trades for their clients. We’ve succeeded in this, as trades on LuxXPrime can be executed from as little as EUR 1,000, depending on the bond.

Jens, what role did EUWAX AG play in the launch of LuxXPrime?

Jens: When launched on September 26, 2019, the main goal was to ensure high levels of liquidity on the new trading window. EUWAX AG is the prime liquidity provider of LuxXPrime. EUWAX’s role is to facilitate trades by acting as a possible counterparty for buyers and sellers of the securities included in LuxXPrime. By quoting two-way prices and ensuring a high presence in the order book, EUWAX AG allows investors to execute their orders on LuxSE at their own convenience. As an additional benefit for investors, all prices quoted on LuxXPrime are firm prices, meaning that the liquidity provider is obliged to execute the order at the published price. This way, cross-border services bring European financial markets closer together.

Guy, how has LuxXPrime evolved since its inception in 2019?

Guy: We’ve come a long way since launching LuxXPrime, and the numbers really reflect that. We started with just over 250 bonds in our portfolio, and now we have more than 2,000. But it’s not just about the quantity, it’s also about the variety of bonds we offer for trading. We’ve really focused on keeping up with broader market trends, especially around environmental, social, and governance principles. Today, LuxXPrime includes 350 green, social, sustainability, and sustainability-linked bonds, which shows how important these factors have become for our investors.

Another important part of our expansion on the bonds offered on LuxXPrime is government bonds. This year, we added hundreds of bonds issued by sovereign, sub-sovereign and agency issuers to LuxXPrime, and there are now more than 800 available for trading on LuxXPrime.

We’re also very pleased to see that there has been a significant increase in trading activity over the past year or so. In fact, in 2023 alone, the number of trades in the LuxXPrime segment tripled, which really highlights the growing impact of our retail-sized bond trading window.

Jens, in your perspective, how does the LuxXPrime trading platform provide advantages to participants in the financial market? Does it align with broader market trends?

Jens: As we have seen recently, interest rates have stabilised at a higher level, making bond investments attractive again since 2023 through higher yields. Nevertheless, the bond markets have lost liquidity in recent years. In this respect, I can emphasise that investors can rely on stable trading on LuxXPrime, with prices in line with the market. As EUWAX AG, we contribute our core expertise to LuxXPrime, ensuring price quality and high likelihood of execution for investors, providing liquidity also for retail-sized trades. This increases price quality and probability of execution in the current difficult and illiquid bond market environment.

LuxXPrime has achieved numerous milestones this year. What future developments can we anticipate?

Guy: Looking ahead, we have a clear strategy in place to further develop our LuxXPrime offering. One of our primary goals is to continue to expand the range of bonds available for trading with new investment products for our members, including new sustainable and SSA bonds, and hopefully reach 3,000 bonds in the next few months.

In addition, we’re focused on growing the flow of transactions on LuxXPrime and expanding the buy-side trading capabilities available on the platform. These efforts will help us continue to deliver value to our clients and solidify our place as a key player in the fixed-income space.

Jens, as the year draws to a close, what are your predictions for the bond market in 2025? How do you think this will influence bond trading

Jens: Our expectation is that yields will probably remain at higher levels and will not turn into negative territory again, in spite of our expectation that central banks will further cut rates, a couple of rate cuts this year and next year. Market expectations are that the markets might discount the end of rate cuts earlier, so we will see stable or slightly higher levels in 2025.