It has been a busy few months since our last Funding Solutions update. As many of our users would have already seen, the team has been hard at work with the launch of Marketplace, South Africa’s first locally developed fixed income bulletin board. We have also been working on adding additional features to the Marketplace platform – read more on this below.
Reliable price discovery in the local bond market has been one of the critical challenges faced by asset managers and bond traders for a long time and this, in turn, negatively impacts liquidity in the market. Our aim with Addendum Marketplace was to develop a place where debt capital market participants can meet, negotiate and transact over various listed and unlisted debt instruments; with anonymised activity reports and real-time price movements available to further assist in the user’s decision-making process.
Addendum Marketplace, which launched in October, has been developed with the guidance and support of the local fixed income market and looks to address some challenges being faced by our market around transparency, liquidity, price discovery and ease of execution. Since launch, we have seen a range of sophisticated institutions show a keen interest in the Platform. Absa is the first of the large local banks to join Marketplace and has committed to using the platform to distribute instruments they hold with the broader debt capital markets. Zine Misani, Senior Credit Trader at Absa, explains: “For Absa, a key part of our strategy on the credit desk is to also look for ways to improve market infrastructure, for the benefit of all. This new platform is intuitive and connects us directly with a host of different market participants.”
At the time of writing, we have three of the large banks using the platform in a similar way. After the fast start and positive feedback we’ve received to date, we are really excited about the potential positive impact of Marketplace and look forward to working with more banks, funders and asset managers as the platform’s user community continues to expand. The initial platform activity was supported by asset managers including Prescient Investment Management, Vunani Fund Managers and Futuregrowth Asset Management who are active participants in the local market. We were also most excited to have the launch of Marketplace picked up by a few local media houses and the full press release can be read on our website here: https://addendum.co.za/news/addendum-marketplace-shakes-up-local-bond-market/
Addendum has partnered with valuation experts RiskCafé to offer users pricing assistance in the form of proprietary pricing curves across a range of different debt sub-types. This plugin to Marketplace, dubbed Analytics, helps platform users understand where an instrument should be priced off the relevant pricing curve. The curves then update in real-time each time a transaction is concluded through the platform. This means that if a transaction takes place, to which you might not have been a party, the data is anonymised, and the price is still fed back into the model for the benefit of all users.
Marketplace is constantly evolving and improving, through the feedback we receive from our users, and we are excited to list a few of the recent and upcoming new features you can expect to see on the platform soon.
Real-time chat: Traders can now engage in real-time negotiations with one another using the new chat feature. After bids are received, the window becomes available and pricing (or any other term) can be discussed before the transaction is concluded. Included in this feature is a new notification badge that will let you know whenever you have a new message and then take you straight to the instrument in question directly from your home page.
Quote with reference to other assets: Fixed-rate bond negotiations are simpler than ever as both the seller and buyer can now give guidance or submit bids as a spread above an underlying reference bond.
Buying Interest: Launching in early 2022, users will be able to post assets they are interested in observing or acquiring to a new Cares list. From here, you can receive all the same benefits that Analytics provides to your portfolio to give you enhanced insight into instruments even before you hold them in your portfolio. You can also easily push the instrument to the Buying Interest page on what will be an expanded two-sided Marketplace.