Platform Profile: DelphX
Larry Fondren is President and CEO of DelphX.
1. Assess the state of your corporate bond trading platforms – what were the primary milestones/accomplishments over the past year?Guided by input from more than 25 dealers and 70+ institutional investors, the patent-pending technology integrated within DelphX was expanded to include:
• Enhanced discovery and negotiation utilities employing our S=ntinel functionality, a mirrored version of distributed ledger (Blockchain) mining technology – through which traders can confidentially outline their potential buying and selling interests and anonymously interact with others possessing complementary interests;
• Tools that enable market makers to provide assured on-demand OTC liquidity (within DelphX and elsewhere) by negotiating private reserves of Cached-Inventory held by investors for their optional market-making deployment; and
• Participant-activated auctions that enable invited counterparties to competitively interact in private single-price and other forms of auctions and sessions.
2. What are your key current initiatives?
• Implementing the new Default Swap Receipt securities we’ve designed to restore liquidity and broadly mutualize the risks of single-name credit default protection – through which DelphX participants can dynamically manage risk and trade a new asset class, and seamlessly execute basis and other cash bond/DSR trading strategies; and
• Providing transparent access to the pricing of all new and outstanding DSRs to enable continuous monitoring of the market’s current assessment of each referenced corporate (and municipal and sovereign) entity’s credit quality – providing a dynamic market-based metric for also determining the likely current value of the entity’s cash bonds.
3. What end-user/buy-side challenges are you addressing, and how?
• Investor need to efficiently manage default and counterparty risk and to, where appropriate, speculatively invest in inversely-correlated securities – DSRs meet those needs; and
• Investor need for definitive BestEx compliance and intuitive and precise pre-trade TCA tools. We will meet that need by providing streaming investor-specific quotes, displaying continuously-updating and validated MAV=n benchmark and midpoint pricing and delivering comprehensive compliance documentation reporting all market metrics current at the time of each trade.
4. How would you characterize the future of the corporate bond trading platform business (broadly), and your business specifically?
Regulation and growing investor demand will likely foster an increasing rate of electronic trading assimilation. We believe platforms that employ innovation to: a) maintain/enhance the traditional roles of dealers; b) accommodate execution of large trades without information leakage; and c) offer investors new forms of alpha and dynamic risk-management tools, will likely earn an increasing share of the market.
5. Please add anything else that you think is relevant.
We also believe that platforms that integrate encrypted messaging (like our Quix functionality) within orders, quotes, RFQs, etc., to enable participants to confidentially communicate as they have would through telephone-based interaction, will more effectively and successfully span the gap between traditional voice-based trading and the use of electronic trading platforms.