BondDesk, S&P to Launch Odd-Lot Pricing Service

BondDesk Group LLC and S&P Capital IQ will launch a pricing service for odd-lot fixed income markets in the last quarter of this year to respond to murky pricing and an increase in smaller transactions.

The service, Odd-Lot Valuations, aims to bring transparency and more relevant pricing to fixed income brokers, advisors and investors that deal in the marketplace for trades that are less than $1 million in size, the companies said in a press release Thursday. The prices in the service will be derived using S&P's methodologies combined with market Data from BondDesk ATS, the company's trading venue for odd-lot fixed income.

"There are often differences between the round-lot evaluated prices that investors see before making a trade and the prices at which their odd-lot trades get executed," Howard Edelstein, chief executive officer of BondDesk, said in the press release. "What the industry needs is a pricing service that reduces this discrepancy and provides an independent benchmark to help assess price quality. Our service will provide these benefits."

Client demands for an odd-lot pricing system have increased over the past year as investors expressed concern over inconsistencies between prices in the market and what round-lot prices actually are, BondDesk managing director Steven Shaw said.

"The problem's always been there, it's just become more and more of an issue," Shaw said in an interview. "Especially now as investors are more and more considering buying individual bonds to ensure their principal, people are looking very hard at these investments, and they need to be sure they're getting the right price."

The idea of a new odd-lot pricing system has been "percolating for a long time," Shaw said, and received greater priority recently as an increase in interest rates has boosted investor activity in the odd-lot market.

"We've seen a very significant increase in volume over the last several weeks and a big driver of that has been an increase in rates," Shaw said. "If you go back a couple years with rates as low as they've been, there haven't been a whole lot of buying opportunities. But as rates creep up, there are a lot more interesting deals.''

Odd-Lot Valuations will provide compliance departments with a consistent way to help assess trade execution quality and provide investors with valuations that are more indicative of odd-lot transactions, BondDesk said in last week's statement.

"The combination of S&P Capital IQ's deep experience in evaluated pricing and BondDesk's unique market data and expertise in odd-lot fixed income trading represent a powerful advantage for professional investors in the fixed income world," Lou Eccleston, president of S&P Capital IQ, said in the announcement.

Users of the new service will have the choice of delivery through BondDesk's workstations or one of the two companies' data feeds, S&P said. BondDesk executes one in seven corporate and municipal trades, according to BondDesk's Shaw.

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