Liquidnet Melds Dark Pool With Bonds Through Vega-Chi PurchaseMatthew Leising and Sam Mamudi
Liquidnet Holdings Inc., which runs a private stock market that opened in 2001, is expanding into corporate bonds by purchasing London-based Vega-Chi Ltd.
Terms of the deal weren’t disclosed by New York-based Liquidnet. If approved by regulators, the union would join its dark pool spanning five continents with a fixed-income platform created by former Goldman Sachs Group Inc. trader Constantinos Antoniades. Vega-Chi customers can trade European convertible and high-yield debt as well as junk bonds in the U.S.
Rules meant to safeguard markets after the 2008 financial crisis prompted the traditional middlemen in the bond market -- the world’s largest banks -- to pare back their operations, making it harder for investors to buy and sell debt. Electronic platforms like Vega-Chi’s are meant to alleviate that problem by letting investors trade directly with each other.
Liquidnet Chief Executive Officer Seth Merrin said changes in the fixed-income market created an opportunity for his firm.
“There’s never been a more necessary time for a Liquidnet for bonds,” he said in a phone interview yesterday. “What Vega-Chi needs is our client base, and what our client base needs is their technology,” Merrin said. “That’s why it’s such a great fit.”
Investors using Liquidnet’s equities dark pool have about $13 trillion in assets, according to the firm’s website. That platform lets money managers trade directly with each other on a private system, bypassing traditional venues like the New York Stock Exchange where bids and offers are displayed publicly. Vega-Chi lets investors buy and sell debt anonymously with each other.
BlackRock Inc., the world’s largest money manager, was one of the first asset managers to attempt to revive bond trading when it created the Aladdin Trading Network, or ATN, in 2012. After volume proved disappointing, it partnered the next year with MarketAxess Holdings Inc. to attract a more diverse group of buyers and sellers.
Also in 2012, Goldman Sachs began offering its clients the chance to buy and sell some debt that the bank held through its GSessions system.
Last year, Tradeweb Markets LLC, creator of fixed-income and derivatives electronic marketplaces, bought BondDesk Group LLC, obtaining the company’s individual wealth-management and bond-trading technology. Earlier this month, Bonds.com Group Inc. agreed to be acquired by MTS, a subsidiary of the London Stock Exchange Group Plc for $15 million.
Bloomberg LP, the parent of Bloomberg News, competes with Tradeweb and MarketAxess in some businesses, including bond and derivatives trading.
Fixed-income trading became more difficult after regulations including the Volcker Rule and other changes under the 2010 Dodd-Frank Act make it more expensive for broker-dealers to hold onto bond inventory to facilitate trading. Among primary dealers that trade directly with the Federal Reserve, corporate debt holdings fell to $56 billion on March 27, 2013, from a peak of $235 billion in October 2007.