FRANKFURT (Reuters) - German exchange operator Deutsche Boerse
Bondcube provides a service akin to a dating site, with the partner search bringing together bond dealers and customers interested in discreetly placing large, market-sensitive orders.
Prospects for this type of platform have been bolstered by rules brought in since the financial crisis that make it more costly for banks to hold large bond inventories on their balance sheets while they search for buyers, which crimps market liquidity.
"Bondcube is specifically aimed at larger trades which have now reverted to the telephone because (other) systems don't seem to be sufficiently functional to execute those larger trades," Bondcube Chief Executive Paul Reynolds told Reuters.
"We really are competing with the telephone market for this business," said Reynolds, previously a director in fixed income at Deutsche Bank
Deutsche Boerse said it would pay a low single-digit million pound amount for the stake in Bondcube. It declined to reveal the size of the stake or whether it might later expand it.
Bondcube plans to launch in September in the United States and Europe, adding Asia at a later stage.
"We will launch when we have 100 buy-side clients on the system and at least two to three sell-side banks, which is the critical minimum number of participants," Reynolds said, declining to give details of any revenue or profit targets.
Buy-side customers will not need to pay to connect to the system or to trade. Sell-side clients will pay an annual connection charge and a small fee based on the traded volume.
(Reporting by Jonathan Gould and Andreas Kroener, editing by David Evans)