Tag Archives: bondcube

FinTech Fire in the Hole- Bond Trading Platform Bondcube Blows Up

Introducing electronic trading to the corporate bond culture is not easy. Fintech initiatives have been trying to crack this egg for 20 years, each promoting the theory that enhanced transparency via electronic trading leads to enhanced corporate bond market liquidity, and ultimately, a robust marketplace for institutional traders to traffic corporate debt and/or via the classic inter-dealer broker business model.

So far, MarketAxxes, which launched in the late ’90s and is best known for bringing small size trades together (under $2mil notional) is one of few that have been able to survive. That said, electronifying the corporate bond market has witnessed several start-up cycles during the past two decades; this current decade counts more than one dozen initiatives; well, that count is “less one” when considering the following news from Finextra.com:

Bondcube, an electronic trading platform for corporate debt, has filed for liquidation just three months after going live.

The startup, backed by Europe’s largest exchange Deutsche Börse, was one of more than 30 new platforms that have emerged in the corporate bond market as a result of new regulations.

Under current capital rules, banks are restricted in the amount of corporate bonds they can hold on their balance sheet, despite the fact that the amount of outstanding corporate debt has risen by nearly 50% to $48 trillion since the financial crisis.

Bondcube and its fellow startups have tried to fill this gap in the bond market by providing buyers and sellers a centralised venue to trade electronically, akin to the various crossing platforms that have emerged in the equities market. The company’s CEO, former Citigroup trader Paul Reynolds, talked of the ambition to make Bondcube, the eBay of the fixed income market.

The problem has been that with so many platforms launching and the existence of longstanding incumbents like MarketAxess, some have struggled to gain the necessary traction.

In a statement, Deutsche Borse conceded that despite succeeding in launching, “sufficient business prospects failed to materialise” and consequently “the shareholders decided not provide further funding”.

Bondcube was formed in 2012 and launched in April this year. It completed its first trade in June, although there were signs that it may struggle for liquidity when a trader at UBS Wealth Management, one of the first participants on the platform, stated that it had taken more than two weeks to find a buyer on Bondcube.

Breaking News: Yet Another Corporate Bond Trading System: Bondcube

Just when you thought the world of electronic bond trading had become saturated, MarketsMuse.com Fixed Income and Trading Tech departments continues coverage of the increasingly popular fixation on the part of entrepreneurs and technology firms, who have set up nearly two dozen new markets to trade corporate debt. In the rhetorical question posed by Bloomberg LP reporter John Detrixhe in his 15 April coverage of yet the latest entrant “BondCube”, the question is whether any of them will succeed.

In advance of the below extract from Bloomberg LP, MarketsMuse editors pose the following question: “Now that there are close on two dozen competing initiatives, which innovator from the world of FinTech will launch a platform that aggregates the APIs of the these disparate systems so as to provide a means by which bond traders can enter an order that will be seamlessly routed to the best destination for best execution? OK, So the likely answer is : Not until there are at least 4-5 systems that have demonstrated they have captured enough liquidity to make it worth the effort to build a fire hose for fixed income order routing. Here’s the extract from Bloomberg LP:

Paul Reynolds, CE0 Bondcube
Paul Reynolds, CE0 Bondcube

Bondcube, a London-based startup 30 percent owned by Deutsche Boerse AG, has gone live in the U.S. and Europe, according to a statement on Tuesday. The fixed-income market hosts securities denominated in 10 currencies, and averages about $300 million of orders a day.

“To simply start in this space as a new platform, never mind survive, you need a good idea, you need institutional financial support — in our case that is Deutsche Boerse,” said Paul Reynolds, Bondcube’s chief executive officer. “You need to be properly regulated. Unless you achieve those milestones, you’re not even going to start.” Continue reading