SIX Vies With Banks by Launching Corporate-Bond Platform
(Bloomberg) — The owner of SIX Swiss Exchange will become the latest exchange operator to compete for a share of corporate-bond trading when it launches an electronic platform to trade the securities in the first half of this year.
SIX Group AG plans to attract large or infrequently traded blocks of bonds to the platform, it said in a statement. The Zurich-based company said the new venue would provide a different service than the banks because it would remove the problems of poor liquidity, small trade sizes, time-consuming negotiations and possible early disclosure of order information.
Exchange operators across Europe are promoting their own platforms in an attempt to remove market share from the banks that have traditionally dominated corporate-bond trading. The banks have found it harder to trade debt since the financial crisis as new regulations have increased the amount of capital they must hold. They have responded by cutting their holdings of securities, dramatically reducing liquidity.
“Trading participants in this electronic platform will be able to transact large orders of bonds simply and efficiently via the new liquidity pool and exchange infrastructure,” Christian Katz, the chief executive officer of SIX Swiss Exchange, said in the statement. “This not only lowers transaction costs, but also improves risk management.”
Bond trading has declined about 70 percent since 2008, according to Royal Bank of Scotland Group Plc. Liquidity has all but disappeared for some securities in Europe as a result of the banks’ reduced inventories, according to the International Capital Market Association.
Technology companies, such as Bondcube, Electronifie Inc. and Algomi Ltd., have been set up to provide an alternative to the banks. Algomi will develop SIX’s platform.
A group of banks and investors is also working on a project called Neptune to create a standardized language and messaging system for trading corporate debt.
Incumbent companies, including MarketAxess Holdings Inc. and Tradeweb Markets, are also competing to retain and increase their share of the market. Bloomberg LP, the parent of Bloomberg News, also has a bond platform.
–With assistance from John Detrixhe in London.
To contact the reporter on this story: Alastair Marsh in London at amarsh25@bloomberg.net To contact the editors responsible for this story: Shelley Smith at ssmith118@bloomberg.net Will Hadfield, Michael Shanahan
