New Board Advisor

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Singapore-based Bond Exchange BondEvalue announced the appointment of Mr. Bill Hartnett as Board Advisor. Mr. Hartnett will advise the Board on strategic matters with a focus on international expansion and scaling the BondbloX Bond Exchange.His appointment comes at an exciting time for the fixed income-focused company which has announced expansion to Mexico and India since closing an over-subscribed Series A round last year, led by MassMutual Ventures and Citi.Mr. Hartnett has 35 years of experience in capital markets and made investments in a significant number of market infrastructure and financial technology companies during the past 15 years while he was at Citi, some of which went from concept to IPO while he was a Board Member.“Bill has experienced the technological evolution of capital markets&nbsp;having started as a pit trader in Philadelphia, through decades of electronification in the FX and FI markets and more recently investing in the institutional adoption of digital assets. He has a true understanding of market structure. On behalf of the Board, I would like to welcome Bill to the BondEvalue family,”&nbsp;said BondEvalue Co-Founder and CEO Rahul Banerjee.Mr. Hartnett said, “The Bond markets are becoming increasingly digitised with advances in technology accelerating the process. BondbloX is utilising digital asset technology to open the fixed income asset class to individuals in the developing markets by becoming the first exchange in the world to fractionalise bonds. I look forward to closely working with Rahul, Rajaram and Rajesh in their journey.”&nbsp;&nbsp;<h4>About BondEvalue:</h4>BondEvalue is a Singapore-based FinTech that has been disrupting the Asian fixed income markets since 2016. The founders, Rahul Banerjee, Rajaram Kannan and Rajesh Johar have decades of leadership experience in debt markets, on both business and technology sides. In October 2020, BondEvalue received a Recognised Market Operator (RMO) approval from the Monetary Authority of Singapore to operate BondbloX Bond Exchange, the world’s first fractional bond exchange. The company’s proprietary technology and enterprise-grade blockchain enables BondbloX investors to buy and sell bonds in denominations of US$1,000 instead of the usual US$200,000, and through a public exchange where prices are highly transparent. The platform operates on a B2B2C model and connects to the end investor via their bank or broker.BondEvalue Information Services brings innovation to bond price discovery, AI-based news, analytics, and delivers these services via mobile, web and APIs.&nbsp; Please visit&nbsp;<a href="http://www.bondblox.com">www.bondblox.com</a> and&nbsp;<a href="http://www.bondevalue.com/">www.bondevalue.com</a> for further information.&nbsp;<h4>About Bill Hartnett:</h4>Bill has over 35 years of experience in capital markets including 28 with Citi. From 2007 to 2021, he was Head of Market Infrastructure and FinTech Investments for Citi Global Markets. He managed a portfolio with a team of six people across New York, Singapore and London. The portfolio’s investment focus is on early and growth stage strategic investments in data and analytics, execution venues, trade processing, clearing, settlement, connectivity, communication and high-performance computing companies. Bill served as a director on the boards of Tradeweb and Markit Group (IHS Markit now part of S&amp;P Global) for seven years prior to those companies going public. Other board directorships included Ipreo, The Clearing Corporation (now ICE CDS Clearing), OTC Derivnet (LCH Swapclear), FX Global Clear, Symphony and QC Ware. During his tenure, the team made investments in blockchain-based tech companies Digital Asset Holdings, Axoni, Symbiont, R3 and BondEvalue.Bill retired from Citi in mid-2021 to move west to Salt Lake City with his wife to enjoy the skiing and hiking in the Wasatch mountains.&nbsp;

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Singapore-based Bond Exchange BondEvalue announced the appointment of Mr. Bill Hartnett as Board Advisor. Mr. Hartnett will advise the Board on strategic matters with a focus on international expansion and scaling the BondbloX Bond Exchange.

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Fractional bonds will now be available on the FinIQ platform. Banks and financial institutions which use FinIQ would have direct access to the BondbloX Bond Exchange (BBX). This would enable these banks to trade fixed income live on an instant atomic settlement basis on BBX. Banks can also offer direct access to their wealth clients for fixed income trades as they have been so for structured notes on the FinIQ platform.Shodhan Shah, director of FinIQ, commented "Our partnership with BondEvalue further bolsters our core offering of providing a front-to-back platform for wealth managers which digitizes, sales and distribution processes. We see increased demand for digital bonds from our clients.""A step towards the digitalisation, democratisation and direct access to bond investment. This takes us closer to our goal of allowing every equity investor to also buy bonds," said Rajesh Johar, Co-founder of BondEvalue."We are excited to join hands with FinIQ in our journey to democratise trading bonds. About 40 banks and venues use FinIQ's open architecture, to provide live quotes and express order capture at a button's click for various financial products. Using bondblox, private banks would be able to offer more personalized and differentiated bond portfolios."About BondevalueThe BondbloX Bond Exchange ("BBX") is the world's first fractional bond exchange launched by BondEvalue. Regulated as a Recognised Market Operator by the Monetary Authority of Singapore, BondEvalue transforms the bond market by enabling investors to conduct electronic bond trading of fractional bonds ("BondbloX") via partner banks and brokers. BBX has integrated with global custodians Northern Trust and Citibank.As an exchange, settlement is atomic, prices are fully transparent, and execution is on a Central-Limit-Order Book. BondEvalue's proprietary technology and enterprise-grade blockchain enable investors to buy and sell bonds in denominations of SGD/US$1,000 instead of the usual SGD 250,000/US$200,000.About FinIQFinIQ is a Singapore-based capital markets technology provider. Established in 2001, FinIQ today caters to order management, best execution, compliance, suitability, documentation, valuation and post-trade life cycle requirements of over 40 financial institutions.The platform is used by nearly 15,000 bankers across 21 countries to electronically trade financial instruments including derivatives, structured products, swaps, funds, bonds, cash equity and cash FX. Direct to Client apps and APIs are also offered in addition to the enterprise platform.

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Fractional bonds are now made available on the FinIQ platform, where banks and financial institutions which use FinIQ would have direct access to the BondbloX Bond Exchange (BBX).

BondEvalue and FinIQ sign MOU to offer fractional bonds

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We are thrilled to announce the integration of BondEvalue, our bond information service, into BondbloX, our bond exchange. Going forward, BondbloX is a unified platform to track and trade bonds.BondbloX represents the critical link to the realization of our vision: Make bond investing easy, where every investor, big or small, can invest in bonds with the same ease and efficiency as an institutional investor.&nbsp;Our aim is to democratize the bond markets, just like equity exchanges did when they moved from floor trading (aka OTC) to electronic trading thirty years ago.&nbsp;BondbloX will allow investors to track and trade bonds conveniently through an integrated App, which will be launched in July 2023. Existing users of the BondEvalue App will continue to track their bond portfolios on the new BondbloX App. The platform is regulated as a Recognised Market Operator (RMO) by the Monetary Authority of Singapore (MAS). It offers investors:<ul><li>A transparent fee structure of 0.20% per trade and 0.20% of assets under holdings (cash and bonds)</li><li>A wide selection of 60+ fractional USD and SGD bonds with a minimum denomination of just $1,000</li><li>A wider selection of 10,000+ full-sized bonds of $200,000 / S$250,000</li><li>Electronic access - no need to call your banker to trade bonds anymore</li></ul>&nbsp;We are filled with gratitude to each of you for participating in and supporting our journey and look forward to serving you as clients of the new BondbloX. If you would like to have pre-launch access to the BondbloX bond exchange, please do sign up on the link: <a href="https://www.bondblox.com/trade-bonds-online.">https://www.bondblox.com/trade-bonds-online.</a> &nbsp;<img src="/uploads/digital_assets_5a0ebd26a9.jpg" alt="">

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We are thrilled to announce the integration of BondEvalue, our bond information service, into BondbloX, our bond exchange. Going forward, BondbloX is a unified platform to track and trade bonds.

BondbloX represents the critical link to the realization of our vision: Make bond investing easy, where every investor, big or small, can invest in bonds with the same ease and efficiency as an institutional investor. Our aim is to democratize the bond markets, just like equity exchanges did when they moved from floor trading (aka OTC) to electronic trading thirty years ago.

BondEvalue is now BondbloX, a Unified Platform to Track & Trade Bonds

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4 November 2022 - Singapore - We are proud and delighted to announce that BondEvalue has won the MAS Singapore Financial Institution Award 2022 at the Singapore Fintech Festival.<img src="/uploads/MAS_Best_Financial_Institution_Bond_Evalue_Bondblo_X_cdf7aabcb9_5ef1fc8d36.jpg" alt="">The solution that won the award is the BondbloX Bond Exchange (BBX), the world’s first fractional bond exchange that enables investors to trade fractional bonds electronically, just like stocks. Regulated by the Monetary Authority of Singapore (MAS), BBX brings efficiency to the bond markets with transparent bond prices and atomic settlement (T+0). With BBX, investors get instant access to bonds and diversification opportunities for their investment portfolios.There were 12 nominees for the Singapore Financial Institution Award including global banks such as HSBC and Citi. Standard Chartered and ICBC came in second and third for the award category.In addition to the MAS Singapore Financial Institution Award, BondEvalue also won the following awards:Top FinTech LeadersRajaram Kannan, Co-Founder &amp; CTO of BondEvalue was awarded the Top FinTech Leader Award by the Singapore Fintech Association (SFA). Rajaram played a crucial role in charting the development of the BBX, leading initiatives in the emergent technological areas of public cloud and blockchain.Knowledge Enterprise<img src="/uploads/Knowledge_Enterprise_Bond_Evalue_a8e7fb6b46_f76cb00a20.jpg" alt="">BondEvalue won the Knowledge Enterprise Award by the Singapore Fintech Association (SFA) for its contribution to the broader finance community in two ways:&nbsp;(a) Curating and delivering quality FinTech courses including the flagship Digital Assets in Capital Markets course, recognized by IBF-STS, that educates finance professionals on digital assets - assets created on a blockchain network.(b) Continuously sharing knowledge on Web3 and capital markets at FinTech events on all scales, including bringing the renowned Digital Assets Week conference to Singapore for the first time in September 2022, being Platinum Sponsors for the Digital Assets Week in London in November 2022, speaking at the Point Zero Forum in Zurich and the India Fintech Festival.About the AwardsRecognising the accelerated pace of digitalisation in businesses over the last two years, the theme for the 2022 Awards is "Embracing Digital. Charting the New Normal." A new sustainability criteria has been included on top of the previous judging criteria of impact, practicality, interoperability, and uniqueness and creativity. This underscores the importance and urgent need for active integration of environmental, social and governance (ESG) factors as part of the overall FinTech business model. About BondEvalueBondEvalue is a fixed income-focused fintech that has launched the world's first fractional bond exchange – the BondbloX Bond Exchange (“BBX”). Regulated as a Recognised Market Operator by the Monetary Authority of Singapore, BondEvalue transforms the bond market globally by enabling investors to conduct electronic bond trading of fractional bonds via partner banks and brokers. The company’s proprietary technology and enterprise-grade blockchain enables fractional bond (“BondbloX”) investors to buy and sell bonds in denominations of SGD/US$1,000 instead of the usual SGD 250,000/US$200,000. As an exchange, settlement is atomic and prices are fully transparent. BBX provides investors instant access to bond markets and diversification opportunities for their investment portfolio. BBX has integrated with global custodians Northern Trust and Citibank. The bond exchange has members from across the world and lists the most popular EM G3 bonds.&nbsp;&nbsp;&nbsp;

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We are proud and delighted to announce that BondEvalue has won the MAS Singapore Financial Institution Award 2022 at the Singapore Fintech Festival. There were 12 nominees for the Singapore Financial Institution Award including global banks such as HSBC and Citi. Standard Chartered and ICBC came in second and third for the award category. In addition, BondEvalue has also won the Top Fintech Leaders and Knowledge Enterprise Awards.

BondEvalue Wins The MAS Best Singapore Financial Institution Award 2022

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This article was originally published on&nbsp;<a href="https://www.hyperledger.org/learn/publications/bondevalue-case-study">Hyperledger</a>.As many industries struggled to find their footing amid the aggressive headwinds caused by the COVID-19 pandemic, the global bond market has managed to thrive.With near-zero interest rates implemented worldwide to ease the financial burdens caused by the coronavirus, the demand for bonds soared with global bond issuances increasing 16% in 2020, according to <a href="https://www.spglobal.com/ratings/en/research/articles/201026-credit-trends-global-financing-conditions-bond-issuance-is-expected-to-finish-2020-up-16-and-decline-in-20-11708610#:~:text=Global%20new%20bond%20issuance%20through,the%20same%20period%20in%202019.">S&amp;P Global</a>. By the third quarter of 2020, the <a href="https://www.icmagroup.org/Regulatory-Policy-and-Market-Practice/Secondary-Markets/bond-market-size/">International Capital Market Association</a> valued the international bond market at a whopping $128.3 trillion.But for those interested in investing in international bonds, the bond markets in Asia and Europe are particularly hard to break into for two reasons: high investment thresholds and lack of electronic infrastructure.In the international bond markets, the minimum investment is $200,000. “This makes it inaccessible for even fairly wealthy people,” says Rajaram Kannan, co-founder and CTO of <a href="https://bondevalue.com/">BondEvalue</a>, a Singapore-based fintech company that focuses on Asian bond markets. Typically, only those who have $5 million or above can afford to diversify their portfolio, and they pour about one-third of their wealth into bonds.But there are roughly 500 million people who are categorized as “HENRY”-s, or high earners not rich yet, who have assets that range from $100,000 to $1 million. This new class of investors is eager to expand their portfolio, yet they find the bond market impenetrable because of the high barrier to entry. “As a result, the liquidity in the bond markets is not even comparable to where the other capital markets are,” says Kannan. “The opportunity for growth is immense.”Even when investors have the means to invest in the bond market, managing bonds can also be a challenge. “One of the pain points in the bond markets is that the trading still happens over phone calls,” explains Kannan. “If you’re a bond investor who wants to buy or sell bonds, you have to call up your relationship manager in your bank or brokerage and go from there. The workflows are not entirely electronic.” Another pain point in the bond market is the extra costs that accrue because of the number of intermediaries involved between the end investor and the actual market. Everyone takes their cut.Until now! The team at BondEvalue recognized the need to upend the global bond market and create a modern infrastructure that makes managing bonds faster, more accessible, and more technologically advanced.“At BondEvalue, our vision was a solution where investors can actually trade bonds on the go from a brokerage app just like they can trade in equity,” says Kannan.In November 2019, BondEvalue launched the <a href="https://www.bondblox.com/">BondbloX Bond Exchange</a>, replacing the traditional over-the-counter trading experience with the world’s first fully regulated blockchain-based bond exchange that allows consumers to instantaneously and transparently trade bonds in smaller denominations of $1,000 each.Fully licensed and <a href="https://thefintechtimes.com/bondevalue-approved-by-monetary-authority-of-singapore-to-operate-blockchain-based-bond-exchange/">regulated by the Monetary Authority of Singapore</a> as a Recognized Market Operator, the BondbloX Bond Exchange operates under a strategic partnership with <a href="https://www.northerntrust.com/united-states/pr/2019/northern-trust-bondevalue-fractionalised-bond-ownership-blockchain">Northern Trust</a>, which is the global custodian partner for the exchange. Together they deliver integrated asset servicing and digital ownership of fractionalized fixed income bonds on a permissioned blockchain network. And from the beginning, the BondbloX Bond Exchange has attracted powerful players in the financial sphere who have signed on as launch partners such as <a href="https://bondevalue.com/news/the-bondblox-bond-exchange-goes-live/">UOB Kay Hian</a>, one of the largest brokerage firms in Singapore.“Asian bonds remain attractive to local and regional investors despite the global uncertainty and market downturn, and we are confident that this partnership will provide customers access to new sources of returns and opportunities to build a more diversified portfolio,” says Wilhem Lee, Senior Executive Director at UOB Kay Hian.“We believe BondbloX will be an industry game changer,” says BondEvalue founder and CEO Rahul Banerjee. “Once investors have experienced BondbloX, they will take to online bond trading with the same fervor they do for equity trading.”<h3>Powering the “Beast” with Hyperledger Sawtooth</h3>“Exchanges are like big tech animals,” says Kannan. “They are beasts.”The BondEvalue team realized the only way to feed this beast and build an innovative, groundbreaking global bond exchange would be to deploy <a href="https://www.hyperledger.org/use/sawtooth">Hyperledger Sawtooth</a>, the open-source blockchain framework hosted by the <a href="https://www.linuxfoundation.org/">Linux Foundation</a>. As a modular and flexible architecture, Hyperledger Sawtooth allows developers to separate the core system from the application domain so smart contracts can specify the business rules for applications without needing to know the underlying design of the core system.“We are in the space where we need to own and build our own tech,” says Kannan. “And we have to give credit to the Hyperledger community and to the Linux Foundation for creating this framework and making our solution possible.”Thanks to Sawtooth’s model, which uses a single node type, “the deployment is fairly simple. Even if somebody doesn’t host a node, it’s quite easy for anyone to sign and submit their transactions,” says Kannan. “If a bank already has a trading app and wants to connect to the BondbloX Bond Exchange, it is relatively easy using contemporary REST or Websocket APIs.”Sawtooth also has rich support for standard and custom events, which helped to develop the distributed apps using an event-driven framework. Further, the permissioning framework was a great fit for creating a broad but closed network of approved participants.Finally, the Practical Byzantine Fault Tolerance is “the perfect consensus” for the BondbloX Bond Exchange. “The reason for using blockchain is to create a trusted network, and we wanted the right protocol that allows for that,” says Kannan.A Sawtooth PBFT network is permissioned and only an administrator can add or remove nodes. This Hyperledger solution also offers a non-forking ledger consensus, which was a key factor in building the exchange. “We can’t tell people that their trade succeeded and then come back after 10 confirmations and say, ‘Oops, sorry, it didn’t work,'” says Kannan. “We needed a framework where when it’s committed, it’s done.”As the BondbloX exchange continues to evolve, the team at BondEvalue remains committed to developing Sawtooth along with Hyperledger’s open source community. “We are looking at how we can contribute back. We have, in fact, made a couple of contributions that are in the process of being assessed by the community,” says Kannan. “We want to add value to the project.”<h3>How it Works: Lower Minimums, Higher Liquidity</h3>The building blocks of the BondbloX Bond Exchange are the BondbloX themselves.Using depository receipts as a model, traditional bonds are brought into the BondbloX Bond Exchange through designated market makers, member participants, or their end individual clients from the secondary market. A designated custodian on the exchange (in this case, Northern Trust) confirms receipt of the underlying bond into the blockchain, which then triggers the bond to be divided into fractionalized BondbloX worth $1,000 each and backed one-to-one on the blockchain.“When a $200,000 bond comes in, the member receives $200,000 in BondbloX which is fractionalized into 200 BondbloX of $1,000 each and can be traded on the BondbloX Bond Exchange,” explains Kannan.With the blockchain infrastructure, settlement on the BondbloX Bond Exchange is nearly instantaneous, occurring on a T+0 basis. So instead of waiting for the normal two-day settlement cycle for traditional bond transactions, BondbloX trades are final within seconds, reducing counterparty settlement risks for investors.However, members who trade in BondbloX are not necessarily locked into the exchange. If a better opportunity in the secondary market arises, the BondbloX are “dual fungible.” Members can request via the custodian to withdraw the BondbloX from the exchange and deliver an OTC bond to a desired venue, which in turn reduces the quantity of BondbloX available to trade on the exchange. “It’s important that members feel that they’re able to take whatever investment opportunities are available to them,” says Kannan.Ultimately, BondEvalue is confident that the best opportunity is to stay within the BondbloX Bond Exchange. “We believe as an exchange, because you’re able to sell at lower minimums, you’ll actually have a much more liquid market that more investors will be capable of investing and buying in,” says Kannan.<h3>Collaboration and Configuration</h3>On the backend, “our governance model is collaborative,” says Kannan.But there are strict rules of engagement for partners who are hosting nodes on the network. While BondEvalue is responsible for most of the work behind updating the nodes with new software, the governing council meets regularly to review upcoming releases and determine a date that is mutually beneficial so that all members can prepare for the updates.“The main challenge is that each release has to be synchronized. Since we use all the nodes, they need to have the exact same software and the exact same version of the transaction process for the system to work as designed,” says Kannan. “If a partner hosting a node doesn’t upgrade, then they will go off chain.”For the frontend, the BondbloX Bond Exchange is a cloud-native application hosted on AWS and accessible via distributed apps on the web. “Because of the event-driven framework that Sawtooth supports, we were able to create a completely asynchronous cloud-native environment that provides the same experience for investors and members that they are accustomed to when trading other exchange-based securities,” says Kannan.To do so, the BondbloX app leverages IoT technology. “We integrated an IoT core solution so that we treat your browser like an IoT device that can deliver real-time notifications,” says Kannan.To avoid committing personally identifiable information on the blockchain, the team also implemented an external database so that personalized user and client information sit outside the network while a pseudo-anonymized identifier is leveraged on the exchange.“Within the blockchain, we had to make it really efficient for the transactions we process or the smart contracts we run, but outside the chain we can query in a really rich format” says Kannan. “So, you’re known by an anonymized ID in the blockchain. But then we merge that data with your real identity in the external database, and that information shows up in our app, which delivers a first-class user experience.”The BondbloX exchange is regulated by the Monetary Authority of Singapore (MAS). After less than a year in the MAS regulatory sandbox — a construct in Singapore where fintech companies test their innovative financial service solutions in the marketplace but under regulatory scrutiny — BondEvalue’s blockchain-based bond exchange graduated after successfully concluding the proof of technology and business model in October 2020.“BondbloX is the latest example of a groundbreaking application of blockchain technology in the capital markets enabled by experimentation in the MAS regulatory sandbox,” says Sopnendu Mohanty, chief fintech officer of the Monetary Authority of Singapore. “We are excited to see productionalization of blockchain in the bond trading market and look forward to great adoption in transforming financial services.”<figure class="image"><img src="/uploads/Fractionalising_bonds_on_blockchain_diagram_8713c38385.jpg" alt=""></figure><h3>The Future of Financial Inclusion</h3>When the BondEvalue team first introduced the BondbloX Bond Exchange, troubleshooting was at the forefront of their concerns.“My biggest worry was what if, what if, what if …” says Kannan. “Today we have gone through all the scenarios and we know what to do if there are issues. We know what those issues are, and we know that they’re not going to bring us down.”So, what’s next? Scaling the BondbloX exchange.BondEvalue continues to engage more member participants such as Taurus Wealth Advisors, the leading fee-based, multi-family wealth management firm in Singapore, and Amstel, an institutional fixed-income broker with operations across Asia and Europe. BondEvalue is also expanding its footprint with a joint venture partnership in Mexico. The company’s goal is to empower a more diverse pool of investors and introduce them to institutional-grade opportunities in the bond market through its cutting-edge blockchain solution.“We are excited to be working with BondEvalue to support a blockchain application that will broaden financial inclusion by opening up institutional bond markets to more investor types,” says Justin Chapman, global head of Market Advocacy &amp; Innovation Research at Northern Trust.“Our vision is to have over 25 million people in Asia invest in bonds in the next five years, from 500,000 individuals currently,” says Banerjee. “This is no small ambition, but we are hopeful as we have seen millions of people forced by COVID-19 lockdowns going online in the last six months for their everyday transactions.”With the continued expansion of the BondbloX Bond Exchange, says Banerjee, “our vision of extending bond trading from Wall Street to Main Street is becoming a reality.”<img src="/uploads/BIFT_and_Hyperledger_Sawtooth_diagram_8b855dd597.jpg" alt=""><h3>About Hyperledger</h3>Hyperledger is an open source collaborative effort created to advance cross-industry blockchain technologies. It is a global collaboration including leaders in finance, banking, Internet of Things, supply chains, manufacturing and Technology. The Linux Foundation hosts Hyperledger under the foundation. To learn more, visit <a href="https://www.hyperledger.org/">https://www.hyperledger.org</a><img src="https://www.hyperledger.org/wp-content/uploads/2019/03/Hyperledger_Logo_Tagline-150x150.png" alt="" srcset="https://www.hyperledger.org/wp-content/uploads/2019/03/Hyperledger_Logo_Tagline-300x60.png 300w, https://www.hyperledger.org/wp-content/uploads/2019/03/Hyperledger_Logo_Tagline-768x152.png 768w, https://www.hyperledger.org/wp-content/uploads/2019/03/Hyperledger_Logo_Tagline-1024x203.png 1024w" sizes="100vw" width="250">&nbsp;

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Featured Article

How BondEvalue Launched the World’s First Fractional Bond Exchange with Hyperledger Sawtooth

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Let’s just say it – bond markets are weird! Everyone involved knows it. In good times, its time-honoured rules, traditions and structure work reasonably well. They work exceptionally well for its middlemen and don’t serve the remaining members of the “exclusive” club too badly.In bad times, like in 2008 and 2020, bond markets are the first to need government help. While equity, commodity and even the oil market have been volatile in the past month, they have managed to find an even keel without external intervention. Central banks are forced to intervene to save the corporate bond market, despite all its players being among society’s most privileged. Their hundreds of billions of dollars’ worth of intervention says something about the vital importance of the corporate bond market. While the importance of the corporate bond market is well discussed, what is omitted is why bond markets seize up so quickly, and how we can avoid another giant bailout next time.Bond and credit markets are the lifeblood of a functioning capitalistic society. Yet, bonds are accessible only to society’s wealthiest because of the individual bond certificate’s high minimum denomination – generally USD 200,000 or its equivalent in other local currencies. Even weirder is the fact that one can trade in bonds only through the trading desks of financial institutions. There are very few established, transparent exchanges or trading venues for bonds where investors can trade transparently.Let’s digest these two points slowly and understand how the bond market is still stuck in the middle ages while the equity, FX and all other major markets have become fully electronified. But before that, a quick recap of what happened in the bond markets for the last few weeks. Bond prices fell across the board until the Fed announced desperate stimulus measures, which included direct buying of corporate bonds, Bond prices have been relatively stable since then.<h3>Sellers can’t Sell, Buyers can’t Buy</h3>“I was worth double-digit millions of dollars, and now I am under severe pressure from my private bankers to post margins. I have only two bank accounts and all that I have is in them, investments, savings, everything.”&nbsp;“My banker said he could sell at 94, he came back an hour later and asked if 84 is OK?”“I wanted to sell my **MCO bond fund but I got a bid that was 10 points lower than its mark. I thought I would rotate out and buy equities, so the loss was bearable. But my “sell” trade did not go through.”“We will make a market if you insist, but you won’t like the numbers”“Exim bank was marked at 102 a couple of weeks ago and now it is suddenly at 79. I told my bank that I would like to buy some; haven’t heard back from them.”“I tried to buy bonds every day last week and kept increasing my bid by 1 point every day. Hardly got anything.”“I thought I was under-leveraged until the bank changed its advanced rate from 70% to 35%. Instead of having “dry-powder”, I am at the brink of a margin call”The comments above indicate a lot of anguish among bond owners and those who wished to buy into the market opportunity. As a collective market, we had both buyers and sellers, but the market was lacking the mechanism to match them.These issues don’t exist in the equity market. As an example, HSBC shares may have gyrated up and down, but everyone knew where they were trading, exact to the second decimal place. Every buy or sell order was passed onto the exchange where the stock trades. Exchanges have clear rule books, processes and surveillance to ensure that the market operates efficiently, which led to higher volumes. Exchanges are the only way to structurally fix the bond markets.<img src="/uploads/HSBC_Stock_Price_and_Vols_2fc60d8784.png" alt=""><h3>Stuck in the Past with OTC</h3>In contrast to how exchanges work, the corporate bond market is still almost entirely phone based or over-the-counter (OTC). Investors call their relationship manager to sell a bond, who in turn calls an investment counsellor, who in turn calls the internal bond execution desk, and then the order goes to the street which has zero risk appetite. The search then begins to find a buyer who wishes to by the exact same bond in the same quantity.Until the global financial crisis of 2009, bond dealers had significant appetite to hold bonds, so when the incoming phone call from an end-client was received the dealer could make him a price and buy or sell the bond. Today dealers hold negligible amount of inventory, and this is a reason why the crises is potentially even graver than the previous one.The graph below shows how corporate debt holdings among primary dealers in the US have dropped over the years indicating this lack of risk appetite.<img src="/uploads/US_Primary_Dealer_Holdings_of_Corp_Bonds_5906f18a5f.png" alt="">There is a parlour game called Telephonie or <a href="https://en.wikipedia.org/wiki/Chinese_whispers">Chinese Whispers</a> that is played with hilarious results. When the markets are stable, everyone is calm and somehow the market functions. But in a crisis, the sequential nature of phone calls clogs everything up. Investors faced with a very-short window to fill margin requirements rush to sell in what appears to be a one-sided market. The next day with brighter prospects there is a rush to buy. This type of a <a href="https://sloanreview.mit.edu/article/the-bullwhip-effect-in-supply-chains/">bullwhip effect</a> is mitigated in stocks due to them being traded on an exchange where everyone has a “direct” view of what is transacting.By moving to exchanges, we will have other advantages too. The settlement cycle will speed up from 48 hours currently, holders of securities will be known and most importantly, prices will be transparent and so will the mark-to-market.&nbsp;Every buy or sell order will be visible to the entire market, hence giving it the maximum chance of getting executed.The naysayers will dig out arguments centred around the fact that there are too many bonds in the world and not all of them trade every day. In a world where General Motors is making ventilators and the movements of each individual on the planet are being monitored in real time, the tech challenges around making bonds tradable on exchanges, while not trivial, are solvable. Perhaps the solution lies in starting with the largest issuers and most liquid bonds. One tech advancement that can play a crucial role is Distributed Ledger Technology or blockchain. Since the bond market is global and trades globally as one, this no longer nascent technology is the way forward.<h3>High Minimum Denominations Restrict Access</h3>Next, let us look at the issue of minimum investment (or denominations). Barring the Berkshire Hathaway A share that is currently trading at $274,000 for a single share, most shares’ prices are kept at lower levels via stock splits initiated by companies’ CFOs as it increases liquidity in the company’s shares. Recently there is a trend to have fractional shares as well, with the mighty Charles Schwab launching the <a href="https://www.cnbc.com/2019/10/22/schwab-fractional-investing-sets-a-new-standard-for-the-industry.html">service</a>.The majority of the world’s bonds trade with a minimum denomination of $200,000, putting it out of reach of the vast majority of the world. Last week, Standard Chartered bank issued a bond that pays a coupon of 4.644%. However, you needed to have a minimum of $200,000 to participate in the bond issuance. In comparison, if you walked into the Standard Chartered bank branch to deposit your savings, you will get a near zero deposit rate.&nbsp;While the risk profile of the two instruments is different due to the long tenor of the bond, the large ticket size prevent investors who understand the risk from participating in it. Interestingly one can buy equity quite easily which by definition is a riskier asset class.In an uncertain world, the need of the hour is to have diversified portfolios which a simple investing mantra that almost all investors understand. But this can’t be practiced in the bond market because of the denomination issue. Asset managers do provide diversification but can charge anywhere from upwards of 1% in fees. In the current low interest rate environment, fees of 1%+ eat up a significant proportion of the total return for a bond fund.While there is no substitute for good advice, appropriateness and investor education, the industry does need to move to smaller ticket sizes. This will involve getting rid of the centuries old tradition where bonds were issued by kings in Europe to their barons and other nobility to finance the kingdom.&nbsp;Fractional bonds will allow the “not so wealthy” to invest like the wealthy.The <a href="https://archive.schillerinstitute.com/fid_91-96/954_Gallagher_Venice_rig.html">plague of 1345</a> caused the end of the Lombard banking system. Let us hope that the COVID-19 crisis spurs us on to replace the plumbing in the bond market so that central banks never need to bail it out ever again.<h3>Additional Reading</h3>1) Bloomberg: <a href="https://www.bloomberg.com/news/articles/2020-03-29/trading-european-debt-amid-virus-turmoil-depends-on-who-you-know">Trading European Debt Amid Virus Turmoil Depends on Who You Know</a> 2) Financial Times: <a href="https://ftalphaville.ft.com/2020/03/25/1585143723000/When-central-banks-take-over-securities-markets/">When central banks take over securities markets</a> 3) Economist: <a href="https://www.economist.com/leaders/2017/04/20/corporate-bond-markets-need-a-reboot">Corporate bond markets need a reboot</a> 4) Economist: <a href="https://www.economist.com/finance-and-economics/2020/03/05/electronic-platforms-are-challenging-bond-broker-dealers">Electronic Platforms are challenging bond broker dealers</a>

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The Troubled Bond Market – When Sellers Can’t Sell and Buyers Can’t Buy

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Redemption for Change of Control

Events of Default

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Deferral Interest Payment

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Following the occurrence of any Change in Control (as defined in Condition 10.3.5), the holder of each note will have the right at such
holder’s option, to require the Issuer to redeem in whole but not in part such holder’s Notes on the Change of Control Redemption Date (as defined in Condition 10.3.5) at 100% of their principal amount together with unpaid accrued interest in accordance with the Conditions. See “Terms and Conditions of the Notes — Redemption and Purchase — Redemption for Change of Control”.

Events of Default under the Notes include non-payment of principal,
redemption amount or interest with the default continuing for a period of seven (7) business days in the case of principal or thirty (30) days in the case of interest; breach of other obligations under the Notes or the Guarantee (which breach is not remedied within thirty (30) days); an event of default or potential event of default (however described) relating to the Issuer or the Guarantor in respect of any Indebtedness for Borrowed Money (as defined in Condition 12.2) which equals or exceeds U.S.$75,000,000 or its equivalent in aggregate and certain events related to insolvency or winding up of the Issuer or the Guarantor. The Trustee at its discretion may, and if so requested in writing by the holders of at least 25% in principal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution of the Noteholders, shall (subject in each case to being indemnified and/or secured and/or prefunded to its satisfaction), give notice to the Issuer and the Guarantor that the Notes are, and they shall immediately become, due and repayable at their principal amount, together with unpaid accrued interest as provided in the Trust Deed, if any Event of Default occurs and is continuing. See “Terms and Conditions of the Notes — Events of Default”.

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