By Katy Burne
Citigroup Inc. (C) is rolling out a new electronic trading
system for corporate bonds, as it becomes the latest in a string of
firms to respond to customers' growing desire to trade directly
with one another.
The platform, Citi Credit Cross, represents another way for
customers to find firms to take the other side of their trades as
they come to rely less on placing orders over the phone with
dealers, whose inventories of corporate bonds have dropped 75%
since their 2007 peak.
In October, Citi announced the launch of Citi Cross, which is a
real-time trading platform for stocks, but that is unrelated to
Citi Credit Cross, which hasn't been officially announced yet.
The Citi bond network, which began a soft launch in November, is
targeted at dollar-denominated emerging market and corporate bonds,
according to an executive at the bank, who declined to be
named.
"With the evolution of these crossing-type platforms, people are
looking at new venues to execute and you are seeing a further level
of electronification in bond trading," said George Harrington,
global head of fixed income trading at Bloomberg LP (BBG.XX).
Bloomberg does not offer Citi's new system on its platform, he
said.
This month, Citi is transitioning clients from a soft launch in
November, when client orders were taken by bank salespeople over
the phone or by email and put onto the platform, to a new mode
where clients convey their own orders directly via a desktop
application.
Only customers are allowed onto the platform and Citi charges a
commission from the buyer and the seller for facilitating the
trade, keeping participants confidential.
The system relies on the bank announcing a forthcoming trading
session for a batch of securities and a set of prices determined by
the bank, but in future Citi hopes to move from sessions based on
fixed prices to two-way markets, where a customer can improve on
that price.
Others that have launched or are working on electronic networks
for corporate bonds include asset manager BlackRock Inc. (BLK), UBS
AG (UBS), Goldman Sachs Group Inc. (GS) and Morgan Stanley
(MS).
Goldman's network went live in the summer of 2012 and matches
customers' orders in batches, with the bank guaranteeing to stand
on one side of the trades up to a certain volume in each session if
orders don't match up. Morgan Stanley's launched early last year
and the firm typically does two auctions a week.
NYSE Euronext (NYX) began offering live, executable prices for
bonds on its exchange in 2007, but volumes have been small to date.
MarketAxess Holdings Inc. (MKTX) has been weighing an exchange-like
system for corporate bonds.
-Write to Katy Burne at katy.burne@dowjones.com