Financial technology vendor LedgerEdge has launched a what it believes is the first regulated corporate bond trading platform built using distributed ledger technology (DLT), the technology that underpins blockchain ecosystems and digital markets. By building an ecosystem using DLT, LedgerEdge aims to modernize institutional-grade trading services and protocols in the $41 trillion global corporate bond market, much of which is still conducted by phone.
LedgerEdge’s new decentralised Multilateral Trading Facility (MTF), regulated by the UK’s Financial Conduct Authority (FCA), is based R3’s Corda permissioned, peer-to-peer DLT platform, which supports applications that foster and deliver digital trust between parties in regulated markets.
LedgerEdge has collaborated with some of the world’s leading global banks, asset managers, and market makers in advance of the MTF’s launch. The system is now operational, 45 firms either live or in the onboarding process in the UK, as well as 70 globally that are either live or onboarding. This includes seven of the top 10 sell-side dealers and more than 30 major asset managers, according to the company.
The platform is designed to allow traders to keep full control over their data and to use smart contracts to reveal only certain information under specific conditions, to minimise market impact. The ability to share data using conditional, bilateral, and anonymous smart protocols also increases the amount of pre-trade data available, for improved transparency around liquidity, according to the company.
“Smart orders only reveal themselves to the very best parts of the market, as defined by the market participants, the users themselves,” says David Nicol, LedgerEdge’s CEO and Co-Founder. “The order gets wrapped with reveal conditions, and then goes and searches the market for the very best match, automatically, autonomously, and confidentially. Once there is a match, the counterparties can start up a bilateral negotiation and get the trade done on our regulated venue. We use DLT to make sure that when users bring their data into their nodes or vaults in the ecosystem, the smart orders see the correct version of the truth whenever they interact with those vaults, instead of everything being forced to go through a LedgerEdge filter. Sell-side firms particularly like this, because it gives them the ability to dynamically tier the streams that they send to users.”
Earlier this year, the company announced a partnership with Charles River Development (CRD), to provide investment firms with access to liquidity from LedgerEdge’s ecosystem via CRD’s Inventory Hub and OEMS.
LedgerEdge expects to announce further integrations soon, according to Nicol. “We’re giving users this really powerful – and fundamentally new – way of trading, and we want to make it feel as familiar and as comfortable as possible for traders, so working with order management systems is massively important,” he says. “We’ve been really happy with our work with partners. We have a wonderful partnership with Charles River, and we’ll continue to work with others as we expand that partner ecosystem.”
LedgerEdge is now concentrating on onboarding firms onto the platform, says Nicol. “It’s not every day that a new trading venue is launched,” he says. “Dozens of firms want to join, so we’re focused on bringing those users in, and it’s going very well, ahead of our expectations. And we’re forming new relationships with customers every week. Going forward, we’ll continue to work with clients and with regulators in the US and the EU. And we’re excited for future announcements about those two markets.”