(Reuters) - Financial technology startup Overbond Ltd is launching a service that will allow companies to issue bonds digitally, the company said on Wednesday.
The Toronto-based firm is among a growing number of companies looking to take advantage of new technologies to make fixed income markets more efficient.
“Markets overall and conditions in markets have accelerated need for technologies of this kind,” said Overbond Chief Executive Vuk Magdelinic in an interview.
Magdelinic said Overbond is offering a previously unavailable digitized service for primary bond issuance. Traditionally, bonds are mostly issued manually by big Wall Street banks, with individual tools servicing portions of the process.
The new service, called OverbondX, will allow clients to execute deals, either private placement or public offerings, based on the information found on its platform. The company said its platform makes the entire process simpler, more efficient and helps issuers move faster, access more investors, and cut costs.
Until now, most platforms have focused on secondary markets, which have suffered from a drop in liquidity in the wake of the 2008 financial crisis. Stricter capital requirements have made it more expensive for banks to act as market makers in corporate bonds, making it harder for asset managers to trade.
While OverbondX focuses on issuance, the company said it could help alleviate the liquidity crunch by introducing better benchmarks on bond prices when they are issued.
Founded in 2015, Overbond’s platform has up to now connected corporate and government issuers with investors and dealers, providing them with a central source of information on bond pricing and bond market updates.
It aggregates fixed income data from DBRS and Thomson Reuters and also offers tools to simplify communication between issuers and dealers.
Overbond has more than 100 issuer clients with a combined value of more than C$100 billion ($76 billion) in bonds outstanding, the company said. Clients include Burger King and Molson Coors Brewing Co TAP.N. It said clients had already expressed interest in issuing via its new service.
Last year, the company raised C$7.5 million ($5.7 million) in seed financing, one of the largest such rounds in Canadian startup history. The company operates in Canada and the United States.
In Britain, fintech startup Origin Markets recently developed a platform that connects borrowers and dealers in fixed income primary markets in a bid to the simplify bond issuance process.
Reporting by Solarina Ho and Anna Irrera; Editing by Bill Rigby