Vega-Chi US Limited ("Vega-Chi") is pleased to announce the upcoming launch of its US high yield bond electronic trading platform in the third quarter of this year.
The Vega-Chi alternative trading system (ATS) will be the first electronic trading platform of its kind dedicated to high yield bonds in the US.
Participation will be limited exclusively to institutional investors. Vega-Chi will create an alternative pool of liquidity where buy-side institutions can trade directly with each other in an anonymous manner which bypasses the broker-dealer establishment and is free of conflicts of interest. There are no upfront or ongoing participation costs and participants pay a small fee only when they execute a trade.
Participants will benefit from the ability to execute trades inside the traditional bid/offer spread quoted by brokers and dealers since they will no longer be required to trade through such intermediaries. All activity in the ATS will be anonymous.
Vega-Chi has already begun the on-boarding process with more than 50 high yield bond institutional investors and expects to launch in the second half of the third quarter with a minimum of 50-70 participants. Banks who typically act as intermediaries in the high yield bond market face a perfect storm of increased regulation, rising capital requirements, higher funding costs, and a high cost base, all of which reduce their ability to commit capital and service high yield bond clients effectively. In addition, the implementation of Dodd-Frank will likely reduce their ability to maintain some of the previous trading business models whose profits were based on a high degree of proprietary trading and positioning. The Vega-Chi ATS aims to fill the market gap created by such ongoing structural shifts in the industry, which have occurred alongside a significant decline in market liquidity and increase in transaction costs.
Vega-Chi will use the same market-proven trading technology utilized by the company's trading platforms in Europe, which was designed with extensive input with clients and has been in use since early 2010.
ConstanConstantinos Antoniades, ince early 2010.
ConstanConstantinos Antoniades, CEO, said "We are very excited about the launch of our upcoming US high yield bond trading platform. The client response has been tremendous. We have already started the process with a good number of large clients who see the need for such a platform in the marketplace and support our launch. Our clients believe a significant portion of high yield trading can be executed electronically and anonymously, bypassing the middle-men and achieving a better price execution."
David Parker, Head of High Yield Sales, said, "It was only a matter of time before a portion of the high yield bond market migrated to an electronic framework. We believe clients are ready to embrace this shift, which allows them to improve their economics by reducing transaction costs as well as increasing the level of direct control they have over management of their positions."
Vega-Chi Limited (parent of Vega-Chi US Limited) already operates two similar successful electronic trading platforms in Europe, one for European high yield and subordinated financial bonds and one for European and Asian convertible bonds.