Singapore financial technology firm BondEvalue has launched BondbloX Bond Exchange (BBX), the first blockchain-based exchange that allows investors to trade bonds in smaller denominations of US$1,000, and makes bond trading much faster, highly transparent and at lower cost, the company said in a statement.
The first trade was made on August 12, involving US$8,000 of BondbloX representing underlying Olam 4.375% bond maturing in 2023 at a price of 100.25%. The trade, between a Singapore citizen and a buyer who is a Singapore permanent resident, was executed through Taurus Wealth Advisors, the first member of BBX.
BondbloX is one of the first, if not the first, bond depository receipt in the world, akin to a depository receipt for shares. Settlement on BBX is on a T+0 basis, or within seconds instead of the normal two-day settlement cycle, thereby reducing counterparty settlement risks for investors. Investors around the world can trade on BBX via web and mobile devices by opening an account with their banks, wealth managers, family offices or robo-advisors, subject to individual country restrictions on bond trading. In Singapore, BBX is open to accredited and institutional investors.
“In Asia and Europe, bond trading is traditionally the preserve of affluent individuals, institutions and corporations as they are typically traded in unit size US$200,000 in the secondary market. Trading is also carried out over the counter (by phone) making for an opaque process and pricing,” BondEvalue says. So the ability to trade bonds in smaller denominations means that investors can build a diversified portfolio without a hefty outlay.
BondEvalue has signed up one of Singapore’s largest brokerages, UOB Kay Hian, as its initial launch partner, Northern Trust of the United States as designated custodian, and multi-family office Taurus Wealth Advisors, as one of the first members of the exchange. More partners are in the pipeline and will come on board in the coming months.
Says BondEvalue founder and CEO Rahul Banerjee: “We believe BondbloX will be an industry game changer. Our vision is to have over 25 million people in Asia invest in bonds in the next five years, from 500,000 individuals currently. This is no small ambition but we are hopeful as we have seen millions of people, forced by Covid-19 lockdowns, going online in the last six months for their everyday transactions. We believe that once investors have experienced BondbloX, they will take to online bond trading with the same fervor they do for equity trading.”
BondEvalue is targeting the so-called HENRYs or “high-earners not rich yet”. The exchange says it will initially list 100 most liquid bonds out of the eight million or so bonds issued around the world. BBX will charge a flat fee of S$2 (US$1.45) per trade, irrespective of size, and a platform fee of 20 basis points annually, while its partners can opt to charge a commission for each transaction.
The exchange is built on permissioned blockchain by Hyperledger Sawtooth, an enterprise open source system for creating and operating a digital ledger of transactions that can be duplicated and distributed across an entire network of computer systems on the blockchain. The blockchain network is secure while the records are immutable and time-stamped.
BondEvalue attributes the speedy launch of the exchange to the Monetary Authority of Singapore’s Sandbox Express, which provided the company with a faster option for testing its innovation.