Investors in Asia can soon get their hands on wholesale bonds for as little as $1,000 as fintech firm BondEvalue taps on the power of blockchain.
Currently, bonds are predominantly traded over-the-counter (on the phone), which makes bond prices opaque and the process inefficient. But this is set to change as Singapore-based BondEvalue is tapping on permissioned blockchain that allows bonds to be traded electronically, like stocks.
By moving bond trading to an electronic exchange, prices become transparent and trade settlement becomes instantaneous. This is a huge improvement from the traditional process of a two-day trade settlement cycle. «The bond market should not be restricted to just the affluent but rather be accessible to all, like equities,» said Rahul Banerjee, founder of BondEvalue in a media statement on Monday.
Jumpstarting in Sandbox Express
The exchange is expected to go live by the end of this month via the Monetary Authority of Singapore (MAS) Sandbox Express. The sandbox, where the company will stay in for about nine months, provides fintechs with a faster option to test certain innovative financial products and services.
«The ability to gather early feedback from actual customers plays an important part in determining the success of innovation. Sandbox Express achieves this by providing a fast lane approval for innovations to be tested quickly in the market. We are delighted that it has enabled BondEvalue to jumpstart an innovative experiment to address real challenges in today’s bond market,» said Sopnendu Mohanty, Chief FinTech Officer at MAS in the statement.
Made More Accessible
The fintech's platform connects to banks, wealth managers and robo-advisors across the world, allowing their customers (limited to accredited investors in Singapore) to trade BondbloX. BondbloX is a fraction of a conventional $200,000 bond wherein each BondbloX has a denomination of $1,000.
«Today only about 50,000 people in Asia are able to afford wholesale bonds, due to the $200,000 minimum investment. BondBloX will grow this number to over 25 million in the next 3-5 years,» Banerjee added.
Highlighting Bonds In Asia
Bonds issued by corporations in Singapore, India, Hong Kong, China, and UAE, as well as those by European banks, will be featured prominently, the company said. The exchange, built on Hyperledger Sawtooth – a modular platform for building, deploying and running distributed ledgers - will be showcased at the upcoming Singapore FinTech Festival (SFF) x Singapore Week of Innovation and TeCHnology (SWITCH) 2019.
Since 2016, the team at BondEvalue has been supplying bond prices to individual bond investors. The firm said that this has allowed them to develop the world’s first blockchain-based bond exchange that allows investors to trade bonds in smaller ticket sizes.
Asset Managers On Board Too
To make the asset class more liquid for investors, U.S. investment house Fidelity International has also put in place a liquidity solution with a T+1 settlement cycle in the past year. While building it took them only six months to develop the infrastructure, changing the mindset of stakeholders and clients to take up the new solution took about 12 months.
«When it comes to fixed income applications, we’re only scratching the surface. I love this asset class, this asset class is about to become more exciting, especially for the retail investor,» said Luc Froehlich, global head of Investment Directing (Fixed Income) at Fidelity International at a recent conference.
