MarketAxess Holdings Inc., the owner of an electronic bond and derivative trading system, has taken additional steps to enable bank customers to trade debt among themselves.
The company’s Market Lists feature allows active trades to be shown anonymously to over 1,000 investors and broker dealer firms, MarketAxess said in a statement today. The company has traditionally concentrated on dealer-to-customer trading.
“Market Lists promotes investor-to-investor order matching and trades are cleared through a participating dealer,” the company said in the statement.
The banks and investors active in the $8 trillion U.S. corporate bond market are shifting toward more electronic trading as U.S. and international regulations take effect. The U.S. Dodd-Frank Act’s Volcker Rule will limit the amount of risk deposit-taking banks can take, reducing dealers’ willingness to keep bonds on their balance sheet. Also, new rules from the Basel Committee on Banking Supervision are forcing dealers to increase capital for their trading businesses to protect against another economic crisis.
The $37.49 billion of corporate securities held as of July 11 by primary dealers that trade directly with the Federal Reserve is down 84 percent from the record high of $235.3 billion in October 2007.
Hedge funds and money managers are also seeing an increase in their ability to find each other to buy and sell bonds, bypassing the traditional role of dealers as market makers. BlackRock Inc., the world’s largest money manager, has said it plans to introduce internalized bond trading among its thousands of clients. Goldman Sachs Group Inc. has begun a similar internal trading system for its customers, called GSessions.
MarketAxess fell 41 cents, or 1.4 percent, to $28.45 as of 11:41 a.m. in New York. The shares have gained 11 percent in the past year. The new MarketAxess features were reported earlier today in the Wall Street Journal.