New York City-based TMC Bonds, the fixed income electronic marketplace, and Codestreet, which provides fixed income sales and trading matching software, have jointly launched what they say is the first dealer-only dark pool for corporate bonds.
The innovative trading platform addresses the issue of constrained dealer liquidity by anonymously matching positions and indications of interest (IOIs) for sell-side participants across the full spectrum of investment grade, high-yield and distressed debt.
The Codestreet Dealer Pool (CDP) works by unlocking liquidity already available on Codestreet’s existing matching platform, used by banks and broker-dealers to identify internal trading opportunities across their positions, orders and client IOIs. The partners say that the ability to now mine a combined pool of thousands of institutional-sized trading opportunities by linking these existing natural pools of liquidity will create significant capital efficiencies for the dealer community.
Unlike the existing inter-dealer market, the CDP protects traders from information leakage and provides a secure, fully-executable electronic platform for negotiating round lot orders (US$1m-plus) in the credit market. The absence of information leakage provides the protection that allows a far broader range of less liquid bonds to be traded. Once participants agree to trade terms, TMC Bonds executes the trade and acts as the counter-party for settlement.
The CDP is now live and the partners expect more than 15 dealers to join the platform over coming weeks, with over half of them already activated. By summer, TMC Bonds and Codestreet expect to have at least 10 of the top 25 ranked corporate bond (investment grade and high-yield) underwriters participating.
“We are delighted to partner with Codestreet on this dealer-friendly initiative,” said Tom Vales, chief executive of TMC Bonds. “The CDP is a genuine game-changer for the corporate bond market, with substantial initial liquidity and the elimination of information leakage likely to be the cornerstones of its success.”
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