Vega-Chi Ltd., which operates a trading platform in Europe for convertible and high-yield debt, plans to start its U.S. junk-bond system next month.
Vega-Chi is introducing the platform on Oct. 24 with more than 45 institutional investors as clients, the London-based firm said today in an e-mailed statement. The company, which bypasses traditional market makers to match buyers’ and sellers’ orders on an “exchange-like” electronic platform, had planned to offer the service as soon as July after announcing it in May.
“Especially given the caliber of clients we’ve signed up, we think it’s significant enough a move to make a meaningful addition,” Constantinos Antoniades, the former Goldman Sachs Group Inc. trader who founded Vega-Chi, said in a telephone interview. “We’ve reached the critical mass we wanted to have. This is happening, it’s real, it’s coming to you in five weeks.”
The effort comes as Wall Street’s biggest banks pare their balance sheets by cutting inventories of corporate bonds to comply with regulations that they reduce their exposure to risk. While holdings of corporate securities at the primary dealers that trade with the Federal Reserve have shrunk 81 percent from their peak in 2007 to $43.8 billion as of Sept. 5, the Bank of America Merrill Lynch’s U.S. High Yield Master II index has expanded in the same period to $1 trillion from $687 billion.
Vega-Chi, which received regulatory approval for trading as a broker-dealer from the Financial Industry Regulatory Authority in April, expects the number of participants to reach 80 within its first three months of trading, the company said in the statement.
Speculative-grade, or junk, debt is graded below Baa3 by Moody’s Investors Service and lower than BBB- at Standard & Poor’s.