Looking to fill a gap, Marketaxess launches electronic Asian bond platform

HONG KONG, Dec 9 (Reuters) - Marketaxess Holdings Inc has launched an electronic trading platform for Asian local currency bonds, as the race for a slice of a growing but nascent regional debt market hots up with stock exchanges joining the fray.

The New York-based firm’s move comes days after Singapore Exchange Ltd said it plans to launch an electronic corporate bond trading platform early next year, a first of its kind in Asia in an attempt to consolidate fragmented markets among exchanges.

Electronic trading of hard-currency corporate debt has taken off in the West in recent years and accounts for 20-30 percent of overall market share, according to various estimates.

But this type of trading is in its infancy in Asia, with the small amount of corporate bonds that are traded adding to existing problems with liquidity. Even Wall Street giants such as Goldman Sachs and Blackrock have stumbled with their own debt trading networks.

“Building new liquidity from scratch is always very difficult,” said Kevin McPartland, principal, market structure and technology at Greenwich Associates. “Traders like what they know, which is why liquidity is sticky.”

Corporate bond issuance in dollars, euro and yen for Asia, excluding the more developed markets of Japan and Australia, has notched up three straight record years, climbing to $210 billion in 2014, according to Thomson Reuters data.

While issuance has boomed, it is still tiny in comparison to its global counterparts. For example, the record amounts of debt issued in Asia is only about 5 percent of European international corporate bond issuance.

The secondary market has faltered with turnover ratios for Asian corporate debt this year at their lowest levels since 2004, according to the Asian Development Bank.

MarketAxess will provide the ability to trade local currency bonds denominated in the Indonesian rupiah, Thai Baht and the Singapore dollar from 10 key market-making dealers, according to a statement.

It already provides a trading platform in so-called “hard currency” corporate debt or bonds denominated in U.S. dollars, euros and Japanese yen.

Global local currency trading on MarketAxess has grown over 180 percent year-on-year and in the third quarter of this year accounted for around 23 percent of all Emerging Markets trade volume on the MarketAxess system, the firm said.

Having enjoyed a fair degree of success with its U.S. platform, market participants will be watching the firm’s entry in Asia as it also pits it against financial information giants, Bloomberg and Thomson Reuters (Reporting by Saikat Chatterjee; Editing by Shri Navaratnam)