“There has been a massive increase in corporate bond issuance and at the same time a depletion of capital that dealers can use to facilitate trading. The result has been increasing difficulty among investment managers and dealers in accessing liquidity," said Seth Merrin, founder and CEO of Liquidnet.
"To fix this liquidity drought over the long term, it is important for market participants to come together and establish new systems and processes and an open platform that will facilitate the flow of liquidity within the corporate bond market more efficiently."
Initially, Vega-Chi’s trading platform will continue to operate separately from Liquidnet’s core equities business. The platform is currently available to all approved market participants who trade US and European high yield bonds as well as European convertible bonds.
Through the platform, market participants are able to source liquidity in one place to execute their institutional, large scale bond orders.
Liquidnet will leverage its network to create a critical mass of liquidity focused on the corporate bond market. In addition, Liquidnet and Vega-Chi expect to introduce the trading of US investment grade corporate bonds this year.
According to a recent research report issued by the TABB Group, there is high demand for a corporate bond market structure that allows diverse sources of liquidity to connect more easily.
More than three-quarters of the buy side firms TABB spoke with said that now is the time for an alternative trading system to help provide greater transparency and support for the liquidity-strained corporate bond market.