AEquity markets were one of the first banking sectors to experience disruption, which arrived in the form of new fintech entrants. These ranged from electronic trading platforms to robo-advisors. The bond market, however, has seen far fewer technological advancements and has remained characterised by old-fashioned methods of trading “over the phone” with little transparency. That is starting to change.
Electronification of bond trading platforms is a growing trend, starting with the larger government debt markets but starting to slowly feed into municipal and corporate bond markets too. One of the distinguishing features of the bond market is that companies generally only issue one stock but may have several bonds, all with different features. This, coupled with the large volumes catering solely for institutional and not retail markets, makes it harder to analyse bond markets.
Increased regulation also appears to have been a barrier to creating liquidity in the bond market. There are less than 50 000 stocks, but up to 3million bonds (in a $50trn market). This vastly larger universe of instruments has made trading less accessible to investors in general, in part due to the lack of transparency and information relating to these bonds.Banks have realised that efficiency in trading presents the best opportunity in the short- to medium-term to reduce costs and increase liquidity. Electronic bond trading exchanges similar to those in use in equity trading are now being used for smaller trades, a trend which is expected to release higher priced human capital to focus on larger, more complex trades.
Current estimates are that a fifth of all investment-grade US corporate bond trades are now done electronically — a figure that has doubled over the last decade.
Apart from electronic trading platforms, fintechs have developed solutions to partially democratise the bond market by making databases of bonds and information on pricing available. Some early-stage fintechs are also developing algorithms for order management, as well as robo-advisors to construct an optimal bond portfolio from a global universe.
These are some of the bond related fintechs on the Matchi platform:
BondView is the leading investor advocate for municipal bonds. BondView, LLC provides municipal bond portfolio analysis and market data for investors and professionals
Community investing platform that allows you to search & filter for bond issuance's by community, cause, or yield
Trumid is an all-to-all electronic credit trading platform. It is designed to unlock liquidity and make bond and CDS trading easier for institutional clients
Through our Honeycomb, Synchronicity and Algomi ALFA technology, we create the bond information network that enables all market participants to securely and intelligently harness data to make valuable financial trading connections
EMBonds is an electronic trading platform for Emerging Markets bonds
UK Bond Network deliver high yield fixed rate bonds for investors and flexible, bespoke.