Wednesday, January 18, 2016 Stamford, CT USA — Despite consolidation among providers of corporate bond platforms and technology, liquidity-starved bond investors could soon find relief from new solutions that open up the pool of potential buyers and sellers, and could eventually provide a view into the location of every bond in the world.

A new report from Greenwich Associates shows that the recent explosion of new corporate bond-related technology initiatives has slowed to a simmer. In the first few weeks of 2015, Greenwich Associates published research outlining 18 different corporate bond trading initiatives in the United States. Nearly 40% of those have either closed, been acquired or are in the process of restructuring. What’s left is a highly competitive landscape of firms and offerings, all hoping to revitalize trading following the market structure disruptions of the past several years.

The new Greenwich Report, Corporate Bond Liquidity Solutions Emerging, analyzes the three key FinTech segments for corporate bonds (Execution, Data , Trader Workflow), identifies the key remaining players and platforms, and pinpoints the biggest areas of opportunity in 2017.  

“In terms of corporate bond technology, the biggest opportunities in the year ahead will be in block trading solutions and liquidity intelligence,” says Kevin McPartland, Head of Market Structure and Technology Research at Greenwich Associates.

An Uber-like Solution?
Of the more than 400 credit investors interviewed by Greenwich Associates in the U.S. and Europe in 2016, more than 80% say reduced market liquidity is impacting their ability to implement their investment strategy. Institutional investors are beginning to accept the current environment as normal and are now working to find new solutions, counterparties and ways of doing business. As they do so, “all-to-all” trading platforms and other approaches that open up the pool of potential trading counterparties have begun to gain traction. 

But the report concludes that, while electronic execution is a huge part of the market’s evolution, providers of liquidity intelligence, information aggregation and market data/analytics are becoming increasingly important. Even as e-trading in corporate bonds grows, more than three-quarters of the roughly $6 trillion traded annually in the U.S. market is still matched and executed over the phone. With trading desks on both the buy and sell side now smaller, technology that helps this high-touch business could arguably become as impactful over the long run. 

“If Uber can upend the taxi business without owning any cars, it might be possible for a complete data set with the right intelligence to create a virtual balance sheet without having one of its own,” says Kevin McPartland. “As such, putting the two together should take us a long way toward a more fluid secondary market.”