Top global banks have joined forces to undertake a new initiative called Neptune. Per a Wall Street Journal report, 12 global banks, including BNP Paribas SA (BNPQY), Societe Generale Group (SCGLY), HSBC Holdings plc (HSBC), Credit Suisse Group AG (CS), The Goldman Sachs Group, Inc. (GS) and JPMorgan Chase & Co. (JPM), are working together on the idea of establishing a one-stop shop for corporate bond traders.
The initiative is not meant for the execution of trade. Rather it is aimed at bringing banks, investors and existing trading platforms under one roof.
In recent times, the bond liquidity for corporate issues has dwindled, mainly due to stricter capital requirements and new regulations. A dearth of liquidity also implies difficulty for fund issuers regarding the sale of bonds, in case the interest rate rises.
Further, there is a wide disparity between trading volumes of new and old bonds. The cheap borrowing rates and increased interest of investors have resulted in an issuance boom of new bonds. In this backdrop, Neptune comes as a nice attempt to make corporate-bond trading more efficient.
The banks are likely to pay £30,000 each ($48,000) for the first phase of Neptune’s consultancy work. The project, initially planned for Europe, will probably take months to deliver.
Moreover, Neptune presents an alternative to the existing communication channels for the corporate-bond investors. Over the past couple of years, several electronic systems have been introduced by banks, exchanges and established operators, aiming to improve bond trading. Some of these initiatives, have however, proved futile.
If this concerted effort actually materializes, it will result in more efficient functioning of the corporate bond market, with the banks gaining a better funding option.
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