Future of Investing

Top bond trading startups

close

Email a Friend

Top bond trading startups

Bond trading isn’t what it used to be. Regulatory changes that came in the wake of the financial crisis both decreased banks’ risk tolerance and made it more costly for banks to warehouse bonds on their balance sheets. Both changes made it harder for banks to bull and sell bonds.

It’s a tough market to crack for startups because, while it’s a huge market (corporate bonds = $8 trillion and Treasuries = $13 trillion), finding the right technology tools is just part of the challenge. There are some incumbent players like Nasdaq’s eSpeed and MarketAxess that electronically trade bonds, but smaller and mid-size firms complain that technology like this is expensive. Market changes have made buy side traders into market makers, a newly uncomfortable position for them, and one that requires setting, not just following, prices on illiquid debt. Clearly, not everyone’s up to the task of building a bondtrading startup. Bondcube, once a promising startup in the bond trading space and partially-owned by Deutsche Bank, shuttered in July of 2015.

Top bond trading startups

Trumid
Founded in 2014, the electronic platform started out trading high-yield and distressed bonds but has more recently moved into the investment grade space. So few bonds actually see a whole lot of liquidity, so Trumid creates swarms, fixed 10-minute periods of trading activity that are supposed to speed price discovery and drive transaction volume. The firm is migrating to Swarm on Demand protocols, which give participants on the platform the ability to initiate their own Swarms when they want. As of February 2016, the startup has added 500 institutions to its bond trading platform and closed $4 billion in volume since launching.

Trumid is backed by some big names in the financial community, including Peter Thiel and George Soros. The firm has raised $33.25m in investment capital since inception. Ravi Singh, a former banker at Goldman Sachs and Credit Suisse, joined the firm in early 2015 and recently was named chairman of the board.

Algomi
Algomi was awarded buy-side Product of the Year accolades in 2015 from Waters Technology for its Honeycomb solution. For banks, Algomi creates a real time internal sales and trading bond information network using the bank’s own data to identify the best trade opportunities and enables real-time collaborations between sales, traders and investors. Algomi’s sophisticated technology is able to connect investors and salespeople without a ripple in the market.

Algomi was founded in the UK in 2012 by industry insiders Stu Taylor, Usman Khan and Robert Howes and Michael Schmidt, former Head of European Credit Trading and IB Board Member at UBS, is the Chairman of the company. The company has been backed by European venture capital firm, Lakestar, which is an active investor in global fintech companies like WeLab, Oscar, Symphony and SoFi.

Direct Match
Upstart bond trading platform, Direct Match, has its eyes squarely on the US Treasuries market, which is also dealing with drying up liquidity. The technology pairs up buyers and sellers through an anonymous order book. The firm, like other bond trading startups, was founded by industry professionals and has made some high profile additions to its executive team and board: William O’Brien, who was appointed executive chairman, was most recently CEO of Direct Edge, and has had numerous senior roles in the industry. The firm also added Rolan Wikstrom, who helped run Citigroup Inc.’s G-10 interest-rates trading group, to the team.

Direct Match recently closed a $6 million investment round that was led by Canaan Partners, which, in addition to other investments in leading fintech companies, also invested in Lending Club.

Electronifie
While some of the startups have targeted trading done at the sub-$1 million tranche level, Electronifie is focused upmarket on larger trades that have primarily been done via voice trading. The firm was founded in 2014 by Amar Kuchinad, a former credit trader at Goldman Sachs. Since its launch to May 2016, $1.75 billion in volume has been executed on Electronifie’s platform , with an average trade size of $3 million.

The New York-based, early-stage startup has raised almost $17 million for its all-to-all corporate bond trading platform. CEO Kuchinad was recently named to Institutional Investor’s 2016 Trading Technology List.

0 comments on “Top bond trading startups”

Future of Investing, Podcasts

Broadhaven Ventures’ Michael Sidgmore on global trends in embedded finance

  • The future of financial services will be driven by non-financial companies that add a financial services layer to serve engaged, frequent users.
  • The pandemic will accelerate the digitization of underlying tech infrastructure and consumer habits, causing long-lasting behavioral shifts.
Suman Bhattacharyya | July 21, 2020
Future of Investing

During pandemic, Personal Capital sees customer inflows, positive feedback for recent rebrand

  • Investment platform Personal Capital rebranded in October 2019.
  • The results of the rebrand, a new marketing campaign, and COVID-19 are all contributing to the firm's growth.
Zoe Murphy | April 23, 2020
Future of Investing

2019: Year of the fintech inflection

  • The fintech market is undergoing changes as investors tweak their strategies.
  • Growth stage companies are seeing a bigger share of the pie, as are emerging markets.
Zoe Murphy | February 19, 2020
Future of Investing, Podcasts

Titan’s Clayton Gardner: ‘We want to make sure we’re building cars, not faster horses’

  • While most robo-advisers have embraces passive investment strategies, Titan has taken a contrarian approach.
  • Its clients turn to the investment app for reasonably-priced hedge fund strategies.
Zack Miller | October 28, 2019
Future of Investing

JMP Securities’ Devin Ryan on the impact of free trading on financial services

  • Over the past few weeks, major brokerages have eliminated brokerage fees.
  • Devin Ryan, MD at JMP, joins us to discuss what the future of financial services looks like.
Zack Miller | October 21, 2019
More Articles