It has been a productive year for our Marketplace team. Since the beginning of the 2023, marked by our inaugural Marketplace Roadmap Event in January, we’ve made significant improvements in both our platform technology and business model. These efforts have resulted in increased platform activity and growing market support, which we shared with users during our August Roadmap Event.
Addendum remains firm in our commitment to enhancing liquidity in South Africa’s corporate bond market.
“Addendum’s mission is to improve liquidity in South Africa’s corporate bond market. Our approach is to create a marketplace where participants can post, negotiate and trade listed debt securities. A single, liquid, bond marketplace should benefit all users through spreads, transparent pricing, market depth and process efficiencies. Improving liquidity requires a sustained effort from all role players. Thank you to everyone who has bought into our mission so far.”
Willem le Roux, Co-Founder & CEO, Addendum
Commercial Progress
The Marketplace platform has witnessed steady growth due to three key factors: an expanding user base, more instruments posted to the platform by banks, and fund managers starting to post their own interest instead of only reacting to interest posted by the banks. Compared to the first eight months of 2022, interest posted has more than doubled, users submitted 28% more bids and offers, and trading volumes surged by 61%.
Our CEO, Willem le Roux, described the platform’s growth as “encouraging” but emphasised that the work is ongoing.
Platform Activity
| Metric | Jan – Aug: 2022 vs 2023 |
|---|---|
| Interest posted | +153% |
| Bids and offers | +28% |
| Nominal traded | +61% |
Changing User Behaviour
We’ve observed evolving user behaviour trends the past six months, with an increase in paying users and a shift towards larger ticket sizes. Notably, users are taking more risks by submitting bids beyond traditional guidance, which aids in improving price discovery and offers valuable insights to liquidity providers.
The bid success rate has declined from 57% in 2022 to 32% this year, and below 25% in recent months. Users are becoming more willing to bid off guidance and are investing less personal time and energy into ensuring transaction success. This is exactly the type of behaviour one would expect to see on a liquid digital marketplace.
Trends Observed
| Metric | Jan – Aug: 2022 | Jan – Aug: 2023 |
|---|---|---|
| Bank: Buy-side interaction | 38% | 75% |
| Average transaction size | R18m | R34m |
| Bid success rate | 57% | 32% |
Roadmap: Update and Future Plans
The development team has made substantial progress, driven by user feedback collected after our first Roadmap Event in January. Here are some key improvements, upcoming features, and plans for the road ahead:
Enhancements and Upcoming Releases
Role Simplification: We’ve streamlined user roles, eliminating distinctions between members and brokers. This allows members to act as brokers, should they wish to do so.
Non-Member Trading: Non-members can now seamlessly trade with each other via intermediaries.
Fee Recovery: We have automated the calculation and recovery of the Addendum fee for fund managers.
Systems Security: Ongoing efforts to enhance system security, including the introduction of two-factor authentication at login.
Market Making Functionality: Responding to user interest, we are developing features such as improved anonymity, platform alerts, integrating with user systems via API, and a revamped the Marketplace Screen for enhanced user navigation.
Analytics: We added fixed coupon bonds and inflation-linked bonds to our analytics offerings. As a result, the accuracy of the modelled spreads displayed for these bonds on the Marketplace has been significantly improved.
Future Plans
Expanding Traded Credit Types: We aspire to become the preferred platform for trading credit and are considering adding other traded credit types based on market feedback. Additionally, we plan to broaden our offerings to include instruments listed across various South African exchanges.
Data Analytics: We continue to prioritise price discovery by developing advanced analytics tools designed to help users make informed trading decisions. One such project we are exploring is stochastically simulating data points for bonds with stale trading information.
Addendum is dedicated to achieving our mission of a liquid corporate bond market in South Africa. We will continue to address challenges and embrace opportunities as they arise.
