London Stock Exchange and Aflac Invest in pricing service BondCliQ

The two companies invested in bond-market quoting system BondCliQ Inc.’s $7.5 million Series A funding round, a BondCliQ spokesman said. The amount of the investments wasn’t disclosed.

BondCliQ provides real-time price information to help traders calculate bond values. Unlike stocks, which trade on centralized exchanges, bonds trade over the counter, making it harder to determine the clearing price of the debt securities on the fly.

Asset-management giant Vanguard Group said its bond traders and data scientists have started using BondCliQ data in their models in a partnership with the startup.

Still, the market for digital bond pricing is crowded with small players such as BondCliQ and behemoths including IHS Markit Ltd., which was recently purchased by S&P Global Inc. Most electronic trading platforms also already provide users with algorithms to calculate corporate bond prices.

Corporate bond markets have accelerated their transition to digital trading amid the rise of electronic marketplaces operated by firms such as Bloomberg LP, Intercontinental Exchange Inc., MarketAxess Holdings Inc. and Tradeweb Markets Inc. The investment also comes ahead of potential new regulation of the industry that could require financial services companies to provide more bond pricing information.

The current system gives large fund managers and broker dealers an advantage over smaller investors because the larger firms see more and bigger trades. U.S. Securities and Exchange Commission Chairman Gary Gensler asked staff to consider potential reforms of price transparency in corporate, mortgage and municipal bonds to level the playing field.

“Many professionals have access to some amount of pretrade price information in the corporate bond market," Mr. Gensler said during a speech at a November securities industry conference. “I wonder if broadening the dissemination of that type of information might make this market more accessible, competitive and liquid."

In times of market turmoil, such as March 2020, the fragmented nature of the bond market can cause investment funds to trade out of sync with the value of the assets they own. The mismatches expose institutions and retirees who actively invest in exchange-traded bond funds to potential losses.

The possibility of increased regulation could boost adoption of BondCliQ, Chris White, the startup’s chief executive, said. “What we’ve been saying to the marketplace is that you will either have transparency develop in the market architecture through us, or that transparency will be mandated."

BondCliQ is marketing its price information to trading platforms as data that can be incorporated in their algorithms, Mr. White said. The firm’s feed includes live pricing from 40 dealers but the five largest dealers on Wall Street have yet to sign on, he said.

This story has been published from a wire agency feed without modifications to the text