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Wave of Innovative Electronic Solutions Arising to Address Broken Credit Markets

By 2 Mar, 2015November 11th, 2019Press Releases

Cognito Europe

  •  From 2007-2014, the size of the global secondary market for corporate debt grew by 47% to USD 48 trillion, but the daily rate of turnover of those securities in the US fell by 48%
  • In response, 23 new electronic corporate bonds trading platforms were launched between 2010 and 2015 in an effort to increase the rate of turnover

LONDON – 2nd March 2015 – A new report from GreySpark Partners, a global capital markets consulting firm, titled Rebooting the Corporate Bonds Market examines how an unprecedented wave of innovation is reshaping the market structure of corporate bonds trading.

Capital markets regulations introduced in the aftermath of the financial crisis have significantly reduced the amount of capital that broker-dealers can deploy to facilitate client trades. The various measures of corporate bonds liquidity – daily rates of turnover, the width of bid-ask spreads as well as surveys of investor sentiment – all point in one direction: credit markets flows are drying out. Consequently, most market participants now describe the secondary markets for corporate debt securities as ‘broken.’

Undoubtedly, the wider adoption of electronic trading is the key to reducing the market’s reliance on bank balance sheets and the re-establishment of a functioning marketplace. Since 2010, 23 new electronic bonds trading platforms have been launched, and another eight are planned for this year. Each of the planned new platforms offers a different trade-off when addressing the ‘impossible trinity’ of price discovery transparency, management of the time mismatch between buyers and sellers and prevention against adverse information leakage.

The 36-page GreySpark report examines how All-to-All, Client-to-Client and Dealer-to-Dealer platforms can provide an answer to the liquidity challenges faced by corporate bonds investors.

Russell Dinnage, GreySpark senior consultant and report co-author, who conducted detailed analysis of the 40-plus corporate bonds trading facilities covered in the research said: “The most radical new electronic corporate bonds trading platform initiatives seek to remove the market’s dependency on broker-dealer balance sheets by either cutting banks out of the loop altogether or by reducing them to a pure agency role. In practice, however, these platforms still rely on broker-dealers to assist with the formation of tradable prices, or they are requiring their members to forsake anonymity.”

Frederic Ponzo, GreySpark managing partner and report co-author, added that the research concludes that: “The majority of these new trading platforms will no longer be trading in three-year’s time. To survive and then prosper, each platform needs to bring the right trading model to the right participants and then have enough time to see the predicted changes in market participant behaviour become a reality.”

For further information on GreySpark’s research, please e-mail: