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Euronext and Algomi to launch new trading facility to improve liquidity in pan-european corporate bond trading

Euronext today announced a 10 year partnership with leading Fixed Income technology provider Algomi to create a long-term joint-venture. This JV, capitalised by Euronext for US$ 2.3 million, will deploy Algomi’s award winning technology to a new MTF owned and operated by Euronext.

  • Under a ten year strategic partnership agreement, Euronext and Algomi will form a Joint Venture Special Purpose Vehicle (“JV SPV”), capitalised by Euronext, with technology supplied by Algomi, to improve liquidity in pan-European corporate bond trading
  • The JV SPV will license Algomi’s leading edge technology on a pan-European exclusive basis [1] to a newly established multilateral trading facility (MTF) owned and operated by Euronext, pending relevant regulatory approvals
  • By linking together Euronext, the banks and investors in a collaborative network, Euronext becomes a centralized market place for pan-European corporate bond trading
  • Multiple streams of synergies in technology and market data will be explored jointly with Algomi through the JV SPV
  • The JV SPV combines Algomi’s award winning and innovative technology with Euronext’s clients network, reputation, neutrality and industry positioning

Dealers will be able to access the trading interface either directly through their existing Algomi technology or through their stand-alone systems. The platform will use algorithmic smart matching processes to create an auction between dealers to improve liquidity and search for best execution.

Strategic Rationale

Local and global bond markets comprise c.US$87 trillion [2] in market value. The majority of trades, by value, are still completed on the phone which results in an opaque and fragmented market based on imperfect information.

There is limited data on buyers and sellers which results in low liquidity. Investors in these markets continue to struggle to find the right trading counter-party at the right time. This unique solution will link Euronext, the banks and investors in a collaborative network which creates a centralised market place. It will turn disparate data into relevant and structured information and increase trade opportunities in the pan-European corporate bond market.

This solution completes Algomi’s Honeycomb bond network, that already connects asset managers and their dealers, by bringing the dealers together for the first time with the strength of the regulated federal model of Euronext.

Paul Humphrey, Head of Fixed-income, Rates & FX at Euronext, commented: “Banks are under increasing pressure to de-risk balance sheet and hold less bond inventory. This platform will create huge network effects that will assist multi-located global sales and trading teams to identify the most profitable trades from the “market noise”.

Mark Ledwards, Head of Exchange & Data Solutions, Algomi: “Existing data from our Honeycomb network suggests that over 40% of less liquid indications of interest could benefit from being matched on the Euronext platform.

Stu Taylor, Co-Founder and CEO Algomi: “We are delighted to be working with such a significant market player as Euronext, who have already proven themselves to be highly nimble and forward thinking in this field. The long term relationship is evidence of the commitment by both sides to improving the European corporate bond market.

Stéphane Boujnah, CEO of Euronext: “The creation of this platform will ultimately diversify Euronext’s offering, with further key synergies in technology and market data to be explored jointly with Algomi. This initiative, alongside our broader ambitions in FICC, fits with Euronext’s “Agility for Growth” strategy of capturing innovative opportunities arising from the market environment, accelerating growth through strategic partnerships, enhancing agility and strengthening its core offering to finance the real economy.

Next Finance , November 2016

Footnotes

[1] Excluding Switzerland

[2] Source: Bank of International Settlement Quarterly Review, December 2015

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