BondDesk Gives Odd-Lot Fixed Income Marketplace an Institutional Makeover

BondDesk Group is expanding its electronic fixed-income marketplace for odd-lot securities into the institutional investment community, the company will announce on Friday.

"We've been driving hard to get this platform out to the buy-side marketplace," says Peter Harker managing director at BondDesk Group, which has been quietly evolving BondDesk Institutional (BDI) into a product. BondDesk currently aggregates inventory from over 110 broker dealers, and has 30,000 live offerings on the platform. "The beauty is to have a enough inventory in one place where the buy-side money manager can come in and it's one source for them," says Harker.In pursuing the buy-side, Harker is going after portfolio managers at trust banks, high-net worth money managers and any professionals who need to buy odd-lot trades - below a million in part value- "and who need to have this inventory in a commingled fashion and across asset classes," says Harker.

BDI already has 125 buy-side clients on the platform, including SEI, a trust management system used by many trust banks, Chittenden Bank, Christiana Bank and others. Half of its clients are with a bank trust and half are traditional money managers, says Harker.

Portfolio managers that use the SEI system are able to purchase a bond, and that order will flow right into the trust system. Of the customers that currently use BDI, about a quarter use the SEI system and the others use other platforms that BondDesk is interested in talking to. Those that use other order management systems (OMSs) would need to key the trades into the OMS after the trade is completed. But Harker says he's talking to two or three other vendors about linking directly to BDI so that money managers can access BDI from the OMS and trades can flow back.

In the past, banks that had a lot of high-net-worth accounts had to manually call up dealers to see if the bonds were available. Now, "You just find them online and click and buy," ways Harker.

Founded in 1999, BondDesk was the first ATS to focus on odd-lot bond executions and to build a leading retail broker platform. "The reason we went after the odd-lot market is that it was underserved," says Harker. In order to negotiate with a dealer on bonds, firms on the high-net worth or trust bank would aggregate purchases. Now it makes sense to come in electronically where someone is doing a trade with 25 or 50 bonds or an institutional lot usually worth north of a million dollars with 100-to-200 bonds.

One of the key factors behind its success is that BondDesk offers firm, executable prices. In terms of liquidity it currently executes over 20,000 trades a day across all fixed income asset classes, including treasuries, agencies, corporate bonds, municipals, mortgages and CDs. Today the main users are traders at retail brokerage houses, financial advisors and individual investors. But BondDesk is keen to leverage its vast inventory and relationships with dealers to penetrate the institutional investor community.

Interestingly, BondDesk is coming out with the institutional platform at a time when a major exchange operator like NYSE Group has just launched NYSE Bonds, an electronic exchange for fixed-income trading. Also, last year, Knight Capital Group acquired ValuBond. Meanwhile, in the institutional marketplace, BondDesk will run into major institutional e-bond trading players such as TradeWeb and MarketAxess. Since these two systems focus on the larger trades, they are complementary to BDI, says Harker. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio