Vega-Chi, which has operated a multilateral trading facility in Europe for several years, has launched a credit alternative trading system (ATS) that will allow firms in the US to match specific credit products without intermediation.
Vega-Chi says the ATS, offered exclusively to institutional investors, will initially focus on high-yield and distressed securities, recognizing that firms require better pricing and efficiency in execution as broker-dealers struggle to provide sufficient liquidity in those products.
"For the first time, the buy side has an interface to trade freely with each other, directly matching orders with others in the institutional investment community. This provides a compelling, cost-effective alternative to the dealer-to-client market structure, which has for so long been the only option available for market participants," says Constantinos Antoniades, Vega-Chi's CEO, describing the ATS as a turning point for the credit markets.
Fees for the ATS will also be lower than over-the-counter (OTC) transactions, ranging from 3 to 6.25 bond cents per executed trade, according to Vega-Chi, and execution on the platform will be fully anonymous.
"By directly sourcing liquidity from buy-side participants, Vega-Chi will provide institutional investors with superior pricing, while freeing up dealers to focus on higher-value, less capital-intensive services. Ultimately, this should be all-around good news for the industry," says Brad Golding, managing director at asset manager Christofferson Robb.
Forty buy-side firms are currently using the platform; Vega-Chi says 60 more are slated to join in the coming months as the market for execution in corporate bonds continues to evolve.
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