Exchange operator Euronext and market data provider Algomi plan to shake up the inter-dealer market with the launch of a bank-to-bank platform for illiquid credit issues.
The platform, which the firms announced in October 2016, is undergoing testing, Stu Taylor, CEO of Algomi, told Markets Media.
Once the platform goes into production, banks will be able to share "soft," confidential data, such as who owns what, who is trying to buy, and who is trying to sell, that does not show up on a trade print, he explained.
Up until now, inter-dealer brokers typically have served that function for banks.
"What we are doing has not gone unnoticed by the inter-dealer firms," noted Taylor.
Euronext also is in the process of obtaining the necessary regulatory licenses to launch a separate credit trading platform.
"We have no intention to be an execution platform," said Taylor referring to the joint project. "We are focusing on data and joining data together across participants and within participants like large banks."
The project represents the first time that Algomi will deploy the technology that powers the vendor's Honeycomb bond information network in the dealer-to-dealer space, according to Taylor.
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Euronext and Algomi have not designed the new platform to compete with existing alternative trading systems that specialize in trading liquid credit issues.
"We think that e-trading works well in the liquid part of the market," said Taylor. "However, if a client launches a multi-dealer RFQ, it assumes that there are dealers that can put prices on those bonds. They will only put prices on the bonds if they are liquid and they can get out of them quickly."
The platform seeks to unlock potential liquidity that banks may have and create more velocity in the more illiquid trades that are often done over the phone, added Richard Colucci, head of the Americas at Algomi.
Euronext plans to turn the platform into a global one by partnering with regional market centers that world to act as additional hubs on the network.
The exchange is in advanced negotiation with several exchange operators, according to Taylor, who declined to identify any of the prospective partners.