NYX Nyse Euronext

NYSE Euronext (NYX) aims to launch a new bond-trading effort in March after securing approval from U.S. securities market regulators, according to the exchange company.

The Securities and Exchange Commission last week cleared NYSE Euronext to move ahead with a program that will see major brokers and electronic trading firms make a new market in the debt of companies listing shares on NYSE Euronext.

The program is the key component of a renewed push into bond trading by the New York Stock Exchange parent, which for years has listed debt instruments but with little trading activity.

NYSE Bonds, as the new project is known, aims to draw in retail-level investors alongside firms that will pledge to provide liquidity in the bonds listed on the platform.

"The fixed-income market has never really seen something like this," said Kevin Molloy, the managing director at NYSE Euronext who is leading the venture.

Molloy said the exchange company is in talks with a number of technology vendors that may offer access to NYSE Bonds. Bloomberg LP, Realtick LLC and Interdealer already are connected, he said.

The venture is seen competing against existing corporate bond trading platforms that are geared toward individual investors, including BondDesk Group, the MuniCenter and Knight Capital Group's (KCG) BondPoint.

"The challenge with having an exchange in U.S. bond trading is that the product is very illiquid; the most active bonds trade only a handful of times a day," making it tough for dealers to keep up a competitive, two-sided market and still profit, Raymond James analyst Patrick O'Shaughnessy wrote in a December research note.

Several major firms are on board to make markets on the new platform, according to Molloy. Under platform rules, so-called "bond liquidity providers" would have to maintain a bid and offer in a specific bond for at least 70% of the trading day, and for at least 5% of the session offer the most competitive price available in all the bonds it trades.

For meeting the thresholds, such firms would be paid a rebate by the exchange. Technology supporting the new NYSE Bonds market will come from Arca, the company's electronic market for stocks and options.

"It's a good idea," said one former executive involved in electronic debt trading, but tough competition from incumbents make a "tough road" for the NYSE Bonds effort in the near term.

-By Jacob Bunge, Dow Jones Newswires; 312-750-4117; jacob.bunge@dowjones.com

(Kristina Peterson and Katy Burne contributed to this article.)

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