Visible Markets, an electronic trading platform for structured fixed-income products, is about to go live.
Promoting transparency and price discovery, the system will run electronic auctions for collateralized mortgages and asset-backed securities.
Launched by co-founders Brian Robertson and Sam Choi, Visble Markets' auction offers two-way benefits. A dealer posts a bond with a reserve level. Once bids meet the level, the bond goes to the highest bidder. "Sellers get a more competitive price and buyers know what they should be paying by seeing other bids," says Robertson, a former Amazon.com executive who is now CEO of Visible Markets. "The auction is anonymous, and there is more price data than is available in the telephone-based world."
Robertson says that he wanted to help build an electronic system to address structured finance, because it is the "biggest category of fixed income." True to the development cycle at Amazon, where Robertson helped build and launch the toy business, Visible Markets ran focus groups and user tests to involve customers in every design stage.
The positive response, coupled with the auction site's decision to adopt a fee-based transaction, helped it to raise $12 million in an early round of financing from Greylock Venture Partners."Asset managers are frustrated with illiquidity in the bond market. Dealers are determined to find cost-effective ways to reach mid-market and smaller clients, who face larger spreads. Most fixed income still happens on the telephone, so dealer sales forces concentrate on larger clients," says Robertson.
Choi, the chief operating officer at Visible Markets, says the firm's auctions system "levels the playing field" in structured finance. "The pricing model is up front. There is no hidden spread." Instead, the site will use a fee-per-transaction revenue model.
Visible Markets will also pioneer price ticker data that surpasses existing data that is available. "Until now, there's been no data for fixed-income spread products," Robertson contends.