Deutsche Börse realizes the purchase of a stake in Bondcube, the innovative new fixed income trading system for a low sum in the single digit millions (GBP).

Bondcube is a London and Boston based electronic bond platform which links dealers and customers in a single marketplace in order to boost the liquidity of the global bond markets. The firm uses tried and tested trading protocols from other markets, such as equities, to optimize liquidity discovery. As a result Bondcube is ideal for large, market sensitive bond orders that have now reverted to execution via telephone.

“The perception of a lack of liquidity in the bond market arises because the existing trading infrastructure protocol means the buy-side can only request liquidity from the sell-side. To solve this problem Bondcube enables all users, whether buy-side or sell-side, to discover liquidity amongst each other, known as ‘all to all’ ”, explains Paul Reynolds, CEO of Bondcube (in picture).

“We are immensely pleased with this investment from such a strategically important global exchange partner and view this as a clear endorsement of our vision and business model, whilst maintaining our innovative capacity”, Reynolds adds.

Bondcube has now commenced signing-up customers and forecasts that clients will be trading with each other in the 3rd quarter of 2014.

“This investment in Bondcube highlights our focus on using innovation to drive growth and buoyancy in financial markets whilst ensuring integrity and safety for all. Through this exciting move Deutsche Börse enlarges its client reach with direct access to the buy side whilst offering unique benefits to the sell side with no disintermediary effect”, says Johannes Weßling, responsible for bonds trading at Deutsche Börse.

Bondcube is a unique new trading system that releases all users to trade freely without constraint, designed and built by industry experts with a world of commercial and technical experience. Post the global financial crisis the dynamics of the bond-trading world have shifted whilst the infrastructure has not. Banks had abundant liquidity, holding large inventories of securities, but now liquidity constraints have resulted in reduced inventories. This has created a bottleneck for the buy-side and consequently trading has become increasingly difficult, reducing secondary portfolio by seventy-five percent. The unique Bondcube trading system overcomes these constraints, especially for large orders.