Top bond trading startups

fintech 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

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 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.

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.

The Startups: Who’s shaking things up (Week ending March 13, 2016)

fintech startups shaking things up

[alert type=yellow ]Every week, Tradestreaming highlights startups in the news, making things happen. The following is just part of this week’s news roundup. You can get these updates delivered direct to your inbox by signing up for the Tradestreaming newsletters.[/alert]

Startups raising/Investors investing

Alibaba’s Ant Financial raising new funding at $60b ahead of IPO (TechCrunch)
Ant Financial, the Alibaba affiliate that manages hugely popular payments service Alipay, is raising a new round of financing that could value the company as high as $60 billion ahead of a much-speculated public listing.

Property Partner lands £15.9m to scale up real estate crowdfunding platform (TechCrunch)
The online real estate investing market is getting more competitive every month.
In any conversation I have about London’s fintech space, property crowdfunding platform Property Partner is almost certain to come up. The startup which lets you invest from as little as £50 in residential property — or the so-called ‘buy to let’ market, as it’s called here in the U.K. — has, by all accounts, been growing at a clip.

Launched just over a year ago it claims more than 6,200 customers who have collectively invested more than £24 million across 166 properties. To further scale up the platform, including increased marketing spend, new products, and growing the team, Property Partner has closed an investment round totaling £15.9 million.

Citi leads $4.2m Selerity funding round (Finextra)
Selerity, a startup that monitors unstructured data and delivers personalised alerts to investors and traders, has raised $4.2 million in a funding round led by Citi, which is also using the firm’s algorithms to provide recommendations to clients through its Citi Velocity platform.

Solar crowdfunding investment platform, Wunder announces $3.6m round (Medium)
Wunder Capital, an online lending platform that connects investors with large-scale solar projects across the United States, announced today a $3.6 million investment round led by Techstars Ventures, Fenway Summer Ventures, and FinTech Collective, alongside existing seed investors.

Online insurance manager CoverWallet raises $2m (Finextra)
CoverWallet announced it received $2 million in seed funding from Two Sigma Ventures, Highland Capital Partners, Founder Collective and a list of strategic angel investors.
The startup, which was in stealth mode until this week, provides small businesses with a concierge-like service that helps businesses deal with the complex, and often confusing, intricacies of commercial insurance.

Former Thomson Reuters chief Glocer invests in Algomi (Finextra)
Former Thomson Reuters CEO Tom Glocer has invested in, and become a strategic advisor to, fixed income liquidity discovery start-up Algomi.

The Startups: Who’s shaking things up

Meet Forcerank, the FanDuel for stocks (WSJ)
The set-up is similar to FanDuel and DraftKings, which let people bet real money with fantasy sports line-ups. Estimize’s new app, called Forcerank, allows players to rank a group of stocks in the order of how they expect them to perform.

But the real reason for the app is far more interesting: the data. Leigh Drogen, chief executive of Estimize, said in an interview with Moneybeat that the idea for Forcerank was inspired by a profitable hedge-fund data program that was shut down by the New York Attorney General several years ago.

Online lender SoFi to run its own hedge fund (MarketWatch)
The unusual move by SoFi is an attempt to get around waning investor interest that is threatening online lenders’ growth. The sector lacks the deposits needed to fund its loans like traditional banks, so it relies on being able to sell the loans to investors to free up capital to make new ones.

Bloomberg’s Matt Levine has his own interpretation on SoFi’s move:
SoFi’s name is “Social Finance,” not, like, “Captive Hedge Fund Securitization Finance.” Lending Club is a “club.” You can witness ontogeny recapitulating phylogeny. A social club for regular people to lend money to other regular people becomes a securitization platform with its own in-house hedge fund while you watch. The whole history of modern finance recurs, sped up, right before your eyes. It is kind of beautiful.
Turns out, SoFi is looking at various ways to ensure capital formation and that is has enough dry powder in the future to keep funding loans. Bloomberg reported that the firm was also sketching out plans to start a real estate investment trust that would buy the mortgages the startup lender makes.

Roofstock is a marketplace for investing in leased single-family homes (Crowdfund Insider)
Just launched this week, Roofstock claims the title of the first marketplace for investing in single-family rental homes. Roofstock matches buyers with sellers in a completely digital transaction. Roofstock states it offers a proprietary inventory of leased, certified, professionally managed homes that generate immediate cash flow.