By Katy Burne
A bond-trading platform operated by Bonds.com Group Inc. (BDCG) began requiring participants to buy and sell debt securities on live and executable prices Monday, a departure from the market's more-routine practice of using indicative quotes.
The move by Bonds.com is a break with a long tradition where bonds have traded by appointment, and is another step on the continuum towards making bonds trade continuously like equities, although this is only expected to be possible for the most actively traded securities. Thomas Thees, CEO of Bonds.com, said he would flip the switch to live prices on 14 bonds issued by seven financial-firm borrowers as an experiment.
For decades, bond trading has been primarily over the phone and shielded from the public spotlight that shines on stock markets.
But recent gyrations in the bond markets have jarred secondary trading, luring dealers and investors away from the shadows and increasingly onto open, electronic platforms.
"We are trying to move the market forward and this is what we are hearing people would really like to see in the advancement of [bond] market structure," said Mr. Thees, referring to live and executable prices.
At present, there is a speed bump to most corporate bond trading. A buyer will receive a quoted price, but that price can move away from them by the time the trader calls a dealer, setting off a period of negotiation before the trade is booked.
Electronic bond networks primarily give traders a last look at prices, meaning many transactions will not be completed. Moving to live prices will remove that "last look" function on Bonds.com, meaning dealers will not be allowed to back away from prices in the 14 relevant securities trading on live prices for any trades up to $500,000.
The issuers whose bonds will flip to the new format on Bonds.com are J.P. Morgan Chase & Co. (JPM), General Electric Capital Corp., Morgan Stanley (MS), Citigroup Inc. (C), Goldman Sachs Group Inc. (GS), Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC).
Write to Katy.Burne@dowjones.com
(END) Dow Jones Newswires
June 24, 2013 10:31 ET (14:31 GMT)
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