Goldman Sachs Group Inc. has added trading sessions and increased the money it makes available to buy securities on its electronic bond-trading platform as the industry grapples with changes in market structure, according to a person briefed on the decision.
Goldman Sachs will hold two daily sessions on its platform, up from twice weekly when it started last year, and will offer $300 million in guaranteed liquidity, said the person, who asked not to be identified because the change hadn’t been publicly announced. The platform, known as GSessions, was halted last month amid a lack of demand, the person said.
Corporate bond dealers and investors have started electronic-trading platforms as they seek to reduce costs and improve their ability to convert investments into cash amid new capital rules. The world’s biggest dealers have cut inventories of corporate debt by three-quarters since the 2007 peak, leading to concerns that waning liquidity provides greater potential for market disruptions.
While clients have been wary of trading on so-called single-dealer platforms run by one bank, the sell-side hasn’t agreed on parameters that would allow one multidealer platform to emerge, according to two people involved in the market.
Goldman Sachs began trading on GSessions in June 2012, after a year of development. The expansion will allow clients to trade 35 bonds -- including investment-grade and high-yield securities -- each day, the person said. GSessions is housed within the New York-based bank’s credit-trading unit and remains a small part of that group’s revenue, according to the person.
Michael DuVally, a Goldman Sachs spokesman, declined to comment. The Financial Times reported the changes to Goldman Sachs’s system yesterday.
The corporate bond market is unsuitable for full electronic trading, according to a study last month by McKinsey & Co. and Greenwich Associates. The bond market has more securities compared with listed stocks and its issues trade at a lower frequency, making a full transition to computer-based buying and selling unlikely, the consultants said.
BlackRock Inc., the world’s biggest asset manager, set up an internal electronic bond-trading system that would match orders from buy-side investors, allowing them to bypass Wall Street dealers. The system failed in April because it couldn’t attract a critical mass of customers, even as small dealers stood ready to aid trading. The New York-based firm said in April it would instead route trades through MarketAxess Holding Inc.’s electronic system.
Morgan Stanley revamped its electronic brokering system, called Bond Pool, last year, offering sessions based on client interest. JPMorgan Chase & Co. and Citigroup Inc. announced plans to start electronic bond-trading platforms this year.
While technology and shifts in market structure have added to the appearance of fixed-income market liquidity, they have added little depth, according to a July report by the Treasury Borrowing Advisory Committee. Trading volumes of investment-grade debt dropped in August to the lowest since 2008.