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September 12, 2013 9:45 pm
Tradeweb Markets, a US fixed-income trading platform, has agreed to buy rival trading venue BondDesk in a deal that will push fast-growing Tradeweb into the market for retail investors.
The deal will be valued at up to $200m, according to a person familiar with the situation. It will mark a departure for Tradeweb, which has focused on the institutional and broker market since its launch 15 years ago.
The group, majority owned by Thomson Reuters, has traded more than 160,000 interest rate swaps and credit default swap indices with a total notional value of $13tn.
“Tradeweb has always focused on the large-scale evolution of electronic trading in fixed income and acquiring BondDesk will allow us to leverage our institutional heritage in driving greater efficiency and overall liquidity in the retail marketplace,” said Lee Olesky, Tradeweb chief executive.
The move aims to exploit the converging size of orders in the retail and institutional fixed-income markets. Balance-sheet conscious dealers have been forced to break down institutional orders into smaller sizes, while private investors become more confident in trading fixed income online.
“There is becoming more of an overlap as institutional investors realise they can get the fill just as well from the retail market,” said Howard Edelstein, chief executive of BondDesk.
BondDesk, the largest US e-trading venue for retail investors, executes more than 20,000 transactions per day in corporate, municipal and asset-backed bonds. Mr Edelstein will step down once the deal is closed. John Cahalane, managing director and head of Tradeweb’s retail business, will lead the combined business.
Tradeweb is also expected to benefit from incoming US regulations intended to push more over-the-counter swaps on to electronic trading platforms, and in July applied to US regulators to become a swap execution facility. While some investors are expected to switch from swaps to futures – their closest but cheaper economic equivalent – others are concerned that the rules will encourage less than ideal hedges for their risk.
Goldman Sachs acted as exclusive financial adviser to Tradeweb, and Broadhaven Capital Partners as the exclusive financial adviser to BondDesk for the transaction.
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