By Katy Burne and Ian Walker
Part of the London Stock Exchange Group has agreed to acquire
upstart bond platform operator Bonds.com Group Inc. for $15
million, according to company officials, as part of its push to
enter the U.S. market for bond trading.
The all-cash acquisition of Bonds.com by a unit of the London
Stock Exchange's MTS Group constitutes the latest exchange,
following NYSE Euronext and Deutsche Borse AG, to position itself
for the gradual shift by U.S. investors into trading corporate
bonds on electronic screens rather than over the telephone.
For decades, trading in the $9.6 trillion U.S. corporate bond
market has been done primarily over the phone, and shielded from
the public spotlight on stock markets. But, recent gyrations in the
bond markets and a pullback by large bond dealers has jarred
trading in the aftermarket, where bonds trade following their
initial offering. That has lured more dealers and investors to use
more open, electronic platforms.
The deal, which is set to close in the second quarter of this
year, will see existing shareholders in Bonds.com-private equity
firm Oak Investment Partners, broker GFI Group Inc.'s subsidiary
GFInet Inc., Mida Holdings, and Daher Bonds Investment Company-exit
their investments. Also set to exit are Jefferies Group, now owned
by Leucadia National Corp., and UBS AG, which held smaller stakes
in Bonds.com. Representatives at these companies either didn't
immediately return messages or declined to comment.
"We are taking advantage of a few clear trends [including] the
trend toward electronic trading and the trend toward
globalization," said Mark Monahan, chief executive of MTS Markets
International Inc.
MTS Markets International already trades bonds electronically in
Europe. The European venue sees about $100 billion of trades a day
on average.
Bonds.com, which caters to corporate bonds and emerging market
bonds, has about 600 investor and dealer participants on its New
York platform, and is known for offering a range of trading methods
to investors, including live streaming prices in an exchange-like
format.
Last month, Deutsche Borse AG agreed to buy another bond trading
platform owned by start Bondcube Ltd, for "a low sum in the single
digit millions" of British pounds.
Bonds.com spent four months looking for a buyer or strategic
partner after incurring debt and losing money.
"The combination of the MTS footprint in Europe and the growing
Bonds.com brand in the U.S. creates a potentially significant
player in the market," said Anthony Perrotta, CEO of fixed-income
consultancy Cornerstone Resources, LLC.
Write to Katy Burne at katy.burne@wsj.com and Ian Walker at
ian.walker@wsj.com
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