Its revamped platform will allow dealers to trade in any bonds they want at any time - changes Trumid hopes will roughly double its hit rate of successful transactions. Trumid focuses on trades of at least US $1m in size that are tricky to pull off on public platforms, where buyers and sellers alike worry pricing information can quickly move the markets. Hence bigger trades are still often done on the phone - a long-entrenched Wall Street tradition that the start-up is betting it can change. "[There are] larger and more sensitive trades that the market is now ready to transact electronically," Trumid President Mike Sobel told IFR.
"It is those block trades we are looking to address." Electronic trading of corporate bonds has become more popular in recent years, partly due to better technology but also because investment banks have cut trading resources. In 2015, online trades represented 20% of trading in investment-grade bonds, compared to 9% in 2005, according to data from Greenwich Associates.
Leaders in the industry, such as MarketAxess and Tradeweb, have had success in trading small deal sizes. MarketAxess's trading volume in May was US $108bn, a 37% increase on last May. But as the incumbents turn their focus towards solving the problem of illiquidity in block trades, tech start-ups like Trumid and Electronifie are also vying for a piece of the pie.
However, reaching a critical mass of participants and adapting electronic trading principles to the corporate bond market in larger trade sizes has proved challenging. A London-based platform called Bondcube, backed by Deutsche Boerse, lasted little longer than three months before it filed for liquidation in July 2015.
Trumid also had difficulties out of the gate because it limited trading to a few short sessions per day - and offered only a handful of bonds to trade. "The idea was to concentrate the attention of market participants on particular securities at particular times," said Sobel, who conceded: "There was room to improve." While he declined to say exactly what percentage of attempted trades on Trumid have actually succeeded, he said the number was in the low-to-mid teens.
Sobel said the company hopes the revamp will take the number to the mid-20% range. Trumid uses a format similar to an equities dark pool, allowing clients to express interest on specific bonds without disclosing their identity or the size of their trade. But unlike a dark pool, if counterparties with matching interests do not execute a trade, the prices become visible to all users, who can then submit bids and offers.
An algorithm then delivers a mid-price - the "true mid" price from which the platform draws its name. This second level of negotiation thus offers greater liquidity and aids price transparency for larger trades, said Sobel. "We have dark pool elements on the platform, but we've moved beyond that with a goal of price discovery and a higher likelihood of trades being executed," he said.
Trumid's re-launch follows the release of a similar product by MarketAxess, which last week launched a new dark pool-like protocol for large corporate bond trades. Liquidnet, which has a well-established equity dark pool, launched its own fixed-income dark pool late last year. Trumid declined to give an exact date when the platform would be re-launched.