The deal is sign that global exchange operators are aggressively entering the U.S. market for electronic fixed-income trading.
Bonds.com is to be owned by MTS Markets International, a wholly owned US subsidiary of MTS, which will acquire 100 percent of Bonds.com’s outstanding shares.
Citing the industry and regulatory drive for greater transparency, efficiency and cost effectiveness in fixed income markets, Jack Jeffery, CEO of MTS Group, said, “This transaction enhances MTS’ position as a global provider of fixed income trading platforms and is a natural extension for both MTS and London Stock Exchange Group.
Bonds.com is teaming up with MTS as it “enters its next phase of growth and development,” stated George O’Krepkie, president of Bonds.com. “We believe that the trend towards greater electronic trading for fixed income products will continue as the customer base has become increasingly global,” said O’Krepkie. He added, that MTS has a wealth of experience in running electronic fixed-income markets and could provide an increase in product choice.
MTS operates an electronic fixed income platform in European bond markets with more than $100 billion executed daily on average over its existing platform. Its U.S. subsidiary, MTS Markets International, offers US buy-side participants the ability to directly access real-time pricing from one of the deepest liquidity pools in Europe and enables them to trade electronically with all the major European dealers via its BondVision platform.
In a statement, Mark Monahan, chief executive of MTS Markets International, said, “MTS will be able to offer its extensive experience in the fixed income space, investing to expand the product offering for U.S. fixed income traders to meet their domestic and international needs.”
This is the second acquisition of an electronic U.S. fixed income platform by a global exchange operator in the past six months, following Nasdaq OMX’s purchase of eSpeed, an electronic platform for trading in benchmark securities. In addition, Tradeweb, which operates client-to-dealer platforms in fixed-income, acquired BondDesk last year.
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The consolidation is a sign that buyers see value in the fixed-income markets as they evolve toward electronic trading, but it also suggests that it can be tough for platforms to build market share without deep pockets and distribution. “I think it’s very good for the industry in that you’re starting to see consolidation, and more importantly, buyers are coming into the market with deep rooted expertise in operating electronic markets,” commented Michael Chuang, CEO of iTB Holdings, an execution management system that can aggregate different fixed income markets. “These are not just bond guys. They are part of global exchange trading platforms in fixed income,” said Chuang, in an interview. Chuang, a former UBS and Lehman Brothers bond trader, said the acquisition is a positive and makes a lot of sense because MTS is a very successful platform in Europe. “And it’s no secret that MTS has aspired to have US expansion plans that started over a year ago. “This acquisition speeds up their entry into the marketplace,” he observed.
While U.S. corporate bond markets are slowly turning electronic, the adoption by the buy and sell-side firms has been slow.
“Clearly this creates more legitimacy, bringing well-known names from Europe into the equation only helps and accelerates things but it’s not a magic potion,” said Chuang. Asked if MTS would tweak the model, Chuang said, all of the platforms are basically a version of two models: One is streaming quotes or streaming order books like the equity model, and the second is the request-for-quote (RFQ) model. MarketAxess, the dominant provider of e-trading for high grade corporate and high-yield bonds, has recently talked about Open Trading protocols being integrated into MarketAxess’ well-established client-to-multi-dealer request-for-quote (RFQ) trading system.
Bonds.com offers anonymous trading with real-time, executable orders on U.S. corporate bonds and emerging market debt with over 600 buy and sell-side institutions. Currently over 90 percent of all trades completed through the platform are conducted electronically, with customer also able to benefit from a price discovery function, said the company’s release.
In emailed comments, Chuang said that MTS’s interest in Bonds.com “is a sign that multi-dealer platforms are garnering greater interest with market participants for accessing fixed income liquidity as compared to single dealer platforms.” While there are a number of single-dealer platforms in the market, many sources agree the trend is toward multi-dealer platforms which is what Bonds.com and MTS offer. Recently, it was reported that Goldman Sachs has halted development on its G-Sessions single-dealer platform after business did not sufficiently increase following a revamp of the platform.
Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio