Bond Market Gets New Entrant in Race to Automate Debt Sales

(Bloomberg) -- There’s a new runner in the race to automate the outdated new-issue market for corporate bonds.

New York-based electronic trading platform Liquidnet will start its own system for ordering new bonds in Europe later this year, according to a statement Thursday seen by Bloomberg News. It joins an array of fintech startups developing products to overhaul the way bonds are sold.

The market for new-issue debt still relies on phone calls, instant messaging and emails to handle billions of dollars in orders and is one of the last corners of finance to experience a digital makeover. But with corporate bond issuance hitting records above $2 trillion in the first half of the year, traditional methods are proving increasingly unwieldy, prompting calls for more automation.

“The market is growing with many more new issues on any given day and yet the infrastructure hasn’t changed really ever,” Constantinos Antoniades, Liquidnet’s global head of fixed income, said by phone. “There’s no question that the direction of travel is towards a more electronic exchange of information and less voice.”

Debt markets have proved a thriving area of finance since the coronavirus swept through economies earlier this year. Companies issuing new debt to shore up their balance sheets in the face of major disruptions to business means primary markets have been busy, boosting revenues for underwriting banks.

Primary Service

Liquidnet’s system will allow investors to receive deal announcements and updates as well as place orders and receive allocation and pricing details. The company already runs a platform for trading existing bonds in the secondary market used by more than 1,300 investors who it aims to attract to the new product giving access to the new-issues market.

It’s focused on the European corporate bond market and the firm may expand to other regions or add other asset classes later, according to Antoniades.

“There has not been enough focus on innovation in the primary space over the course of the previous decade,” said Cathy Gibson, head of dealing at Royal London Asset Management.

The rush to introduce technology to the bond market has already attracted a host of entrants, meanwhile. Firms that are already offering products aimed at shaking up bond ordering include DirectBooks LLC, a joint venture by a group of banks including JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. The platform aims to start operating toward the end of the year, starting with U.S. dollar investment-grade corporate bonds.

Read more: Wall Street’s New Bond-Ordering System to Launch by Year-End (1)

Another is IHS Markit Ltd.’s Investor Access system which already allows traders in Europe and Asia to order bonds electronically. London-based Nivaura is seeking to automate parts of the new-issue process like producing detailed bond prospectuses. The firm, which raised $20 million in seed funding last year, is seeking to cut the cost of issuance and reduce settlement times.

Bloomberg LP, the parent of Bloomberg News, provides services that facilitate bond ordering and distributes information on new debt offerings.

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