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WFH has brought fintech to the core of capital markets

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By Burhan Khadbai
11 Aug 2020

Some argue that innovation has taken a backward step in the pandemic with the loss of people working in close proximity bouncing ideas off each other. But that’s not the case in the capital markets. In fact, working remotely in such a vast but archaic business has brought the use of technology to the centre of discussions.

Over the past few weeks, two new bond issuance platforms have surfaced.

The first, Bond Origination Technologies (Bots), is being set up by Oliver Corstjens and Stephan Gimpel, two former bond bankers from Citi.

The details on how Bots will operate are scarce, but its website describes it as a “workflow and analytics platform” that will use the latest technology to help overcome the inefficiencies of debt capital markets.

Bots has secured initial funding, developed a prototype, and is in the process of securing commitments from its first clients.

The other new issuance platform that has appeared is being developed by Liquidnet, which is expanding into the primary market with an initial focus on European corporate and emerging market bonds.

The project, called Liquidnet Debt Capital Markets, is close to launch and will be embedded in the firm’s fixed income trading platform. It will cover the entire new issue process, incorporating announcements, deal updates, order collection, allocation and pricing.

These platforms will not be short of competition with the likes of Agora, DirectBooks and the European Central Bank also looking to launch their own digital DCM platforms. 

A temporary forum created by the ECB to discuss its proposed European Distribution of Debt Instruments (EDDI) project will be holding its first meeting next month.

Additionally, several recently launched platforms are looking to grow their presence, including Origin, Nivaura and Ingen.

With market participants working remotely for a while yet — perhaps permanently in some cases — it is no surprise to see that more platforms are being created in the pandemic.

The complaints from market participants about the fragmentation of the bond markets before the pandemic were well-known. There was no single system to connect issuers, arrangers and multiple service providers to share information. Many tasks were still being done manually. Compliance processes were too complicated. The list went on.

Working remotely has only magnified these issues, particularly as borrowers ramp up their activity in the bond markets in response to the pandemic and new borrowers come to the fore.

Each of the various platforms have their own unique selling points. But what they have in common is a collective response to the anachronistic system of selling bonds, heralding a more interconnected debt capital market.

Of course, there’s no promise that any of these platforms will tick every box and become the ultimate solution. Some may also drop out in the battle for dominance, while others will merge.

But the bond market can only benefit from the belated charge to bring tech to the fore just when it needs it.

By Burhan Khadbai
11 Aug 2020