Vega Chi set to widen FIXED INCOME product slate (efinancialnews.com)
August 22, 2013 Leave a comment
Vega Chi set to widen FIXED INCOME product slate (efinancialnews.com)
Vega Chi, a three-year-old electronic bond platform operator set up by former Goldman Sachs executives, is set to expand into new fixed income products as it looks to capitalise on a regulatory environment which is promoting greater transparency around bond trading.
The London-based platform is “consistently examining various segments of the fixed income market…for potentially launching additional products and platforms”, according to its chief executive Constantinos Antoniades.
Vega Chi, which currently operates platforms for high-yield and convertible bonds in Europe and the US, is set to launch a new platform next year, according to Antoniades, though he would not provide details on the nature of the products to be traded.
Antoniades was previously head of European convertible bond trading at Goldman Sachs, and set up Vega Chi in 2009 along with former colleagues from the US bank. Venture capital firm Octopus Investments acquired a stake in February 2011, but Antoniades remains Vega Chi’s majority owner.
The firm launched a multi-lateral trading facility for European convertible bonds in February 2010, enabling institutional investors to trade directly with each other without having to go via brokers. It added European high-yield and subordinated bank debt to that platform in February 2012 and in October last year launched a new US high-yield bond venue.
Vega Chi only accounts for a small proportion of bond trading: the wide variety of bonds available make them ill-suited to electronic trading, while dealers are reluctant to give up profitable, voice-driven bond desks. However, G20-led reforms being enacted in Europe via the European Market Infrastructure Regulation and a revised version of the Market in Financial Instruments Directive — as well as tougher capital requirements — are conspiring to move fixed income trading away from OTC markets and onto electronic platforms.
The new rules have already led to a liquidity slump as dealers increasingly wind down their inventories — the stockpile of securities they hold in order to make markets. In the US, corporate-bond inventory held by banks had fallen from $218 million at the end of 2007 to $57.5 million at the end of 2012, according to data from the Federal Reserve Bank of New York.
Antoniades said: “We believe that the market place has come a long way in the last 12 months in terms of engaging in electronic trading platforms. In the last six months especially, we have seen strong interest in all our platforms from clients that traditionally have been on the sidelines as they seek the maximize their access to liquidity.”
The structural shift over the past year has seen a crop of new bond trading platforms, including BlackRock’s Aladdin platform, and revamped single dealer offerings such as Goldman’s GSessions and Morgan Stanley’s Bond Pool.
–write to timothy.cave@dowjones.com and follow on Twitter @TimCaveFN
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