Odd-Lot Bond Pricing Service Is Launched

Terry Flanagan

Recognizing the need for improved price transparency in the odd-lot fixed income markets, BondDesk Group and S&P Capital IQ have launched a new pricing service for U.S. corporate and municipal bonds, Odd-Lot Valuations.

The evaluated prices in this new service will be derived using S&P Capital IQ’s proprietary methodologies and factor in market data from the BondDesk ATS, the largest odd-lot fixed income trading venue in the United States.

Odd-Lot Valuations will include bid- and ask-side odd-lot (<$1 million) evaluated prices, a market range around these prices and a suite of tools to deliver these outputs to fixed income marketplace participants including retail brokers, market makers, buy-side institutions, interdealer brokers, data providers and alternative trading systems (ATSs). The service will bring a degree of confidence to the execution of odd-lot fixed income trades, provide compliance departments with a consistent way to help assess trade execution quality, and provide investors with valuations that are more indicative of odd lot transactions. “There are often differences between the round-lot evaluated prices that investors see before making a trade and the prices at which their odd-lot trades get executed,” said Howard Edelstein, CEO and Chairman of BondDesk Group. “What the industry needs is a pricing service that reduces this discrepancy and provides an independent benchmark to help assess price quality.” Institutions are trading bonds more frequently and in smaller sizes. Since 2006, block trades ($25+ million), as a percentage of par value, have declined by 20%. Conversely, round-lots ($1 million to $25 million) have grown by 37%. Odd and micro-lots have grown by 150% and 197%, respectively. “Approximately 90% of corporate and municipal bond trades are less than $1 million in size,” said Steven Shaw, managing director at BondDesk. “It’s crucial for participants in this marketplace – investors, traders, financial advisors, compliance officers and portfolio managers – to have a relevant benchmark for trade execution and portfolio pricing.” The pricing service, expected to launch in the fourth quarter of this year, will initially cover U.S. corporate and municipal bonds. Users will have the choice of having it delivered through BondDesk’s workstations or one of BondDesk’s or S&P Capital IQ’s data feeds. S&P Capital IQ, a part of McGraw Hill Financial, is a provider of multi-asset class and real time data, research and analytics to institutional investors, investment and commercial banks, investment advisors and wealth managers, corporations and universities around the world. “The combination of S&P Capital IQ’s deep experience in evaluated pricing and BondDesk’s unique market data and expertise in odd-lot fixed income trading represent a powerful advantage for professional investors in the fixed income world,” said Lou Eccleston, president, S&P Capital IQ. “I believe the quality of our prices and the availability of a corresponding market range will bring higher levels of certainty and efficiency to the odd-lot market.” BondDesk Group provides fixed income trading to a community of over 2,000 investment firms. Its BondWorks Wealth Management Platform provides over 105,000 financial advisors and asset managers with portfolio management, price transparency and compliance solutions that empower them to better service the needs of the investing public. The BondDesk Alternative Trading System (ATS), operated by BondDesk Trading provides access to an aggregated pool of over 170,000 daily live offerings of odd-lot fixed income securities in a broad range of asset classes. The BondDesk ATS executes 15,000-20,000 transactions per day with high fill ratios and price quality.

Related articles