Primary Bond Markets Need Electronification
Shanny Basar

Primary Bond Markets Need Electronification

The Primary Market is the remaining workflow that can be electronified in Fixed Income. Typically though for Fixed Income there are at least three initiatives that the buy-side will need to assess.

Bond issuance would benefit from technology that increases efficiency according to the latest quarterly report from the International Capital Market Association.

Gabriel Callsen, associate, market practice and regulatory policy at ICMA, said in the report that investment grade primary bond markets offer potential for electronification.

He said: “This is reflected by a growing number of fintech initiatives in relation to the investment grade bond issuance process and life cycle, whether leveraging existing technology or early experiments building on distributed ledger technology.”

Callsen said investors want technology in primary bond markets that increase efficiencies and offer straight-through processing by reducing manual processes, especially for deals that involve multiple syndicate desks.

“For example, from communicating with syndicates throughout the book building process; to providing feedback before deal completion; to exchanging information on and disclosing final pricing,” he added.

The issuance process would also benefit from standardising term sheets and deal documentation, enhancing access to prospectuses, improving the allocation process and standardising timeframes for communication, in particular for investors with global operations.

“To enable greater technology uptake, an open-source infrastructure utility would be desirable to allow connectivity to multiple technology providers and across multiple asset classes,” said Callsen.


Issuers also find bond issuance a manual and time-consuming process according to the report. They would benefit from direct connectivity and communication with investors but there are currently no common industry standards for electronic book building, which would be helpful for increasing the use of technology.

ICMA said bank syndicates are supportive of electronification and straight-through processing. The report noted: “Nonetheless, from an organisational perspective, it is worth bearing in mind that many banks are siloed across products, while investors often have a single desk both for primary and secondary bond markets”“Technology has the potential to streamline both pre-book and book-building processes, improve pricing efficiency, and create greater transparency,” added Classen. “Clearing and settlement, as well as liability management processes also lend themselves to greater electronification.”

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