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Liquidnet Links Portfolio Managers Directly with Syndicate Banks for New Bond Issuance

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Agency broker Liquidnet has introduced new functionality for new issue bonds, which enables investment firms to communicate with syndicate banks directly from their Order/Execution Management Systems (O/EMS) as part of the book build process, before the bond is priced and allocated.

The new feature, which builds on the Liquidnet Primary Markets functionality the company launched in September last year, enables firms to set up bonds in the early stages of the syndication process directly within their OEMS, using a unique pre-ISIN identifier, and to send orders in those bonds to the syndicate bank group.

“Following launch of Liquidnet Primary Markets last September, which delivered a new issue trading protocol and the first stage of workflow automation of new bond issuance via electronically actionable new issue announcements, we’ve now demonstrated the next stage of electronification in the primary markets,” says Paul Tregidgo, Senior Advisor with Liquidnet. “This will enable institutional investors to set up, directly in their O/EMS, new bonds as and when they’re announced, to facilitate their workflows around the new issuance process.”

“Liquidnet already has integrations with most of the major O/EMSs that clients use in Western Europe and the US,” says Mark Taylor, Fixed Income Product & Business Development at Liquidnet. “So we looked at how we could leverage that, along with the early provision of a unique identifier, for secondary trading of bonds that have just been announced but have not yet come to fruition.”

The unique identifier for each new issue bond before an ISIN or CUSIP is allocated was a key requirement, says Taylor. “At the moment, those unique identifiers typically don’t get ascribed until the evening or even the next day, which is often too late to be useful. So we provide a unique identifier, available to all of our clients, allowing them to immediately raise an electronic order in a bond which hasn’t been priced yet.”

Charles River Development (CRD) is one of the first O/EMS vendors to support the feature, and Liquidnet has plans to integrate the new functionality with other O/EMS platforms in the near future.

As well as making new issue bonds available for buy side clients to trade as soon as they are announced, Liquidnet will also make data on those bonds available to a broader range of users, says Taylor. “There are people and teams within an investment firm, away from the trading desk, such as portfolio managers, dedicated data teams and so on, who help with getting the bond set up. So we’ve also built a web-based portal for them to have read-only access.”

Liquidnet Primary Markets will ultimately be Liquidnet’s end-to-end electronic solution to bring more efficiency to the new issue process, says Tregidgo. “Automation of new issuance has received plenty of attention, and it’s pretty clear that an end to end solution addressing the needs of all market participants will involve various actors throughout the workflow chain. So the key to delivering automation to all market participants is going to be interoperability of these various protocols. The automation journey is a step-by-step process. Enabling new issues to be set up automatically within Order/Execution Management Systems, and enabling orders to be sent electronically to the banks, are two critically important steps, and that’s what we have addressed here.”

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