Start-up trading platform Trumid has announced a $208m capital boost from several Wall Street investors, hoping to benefit from a pandemic-driven surge in electronic bond trading as it seeks to use technology to change the way corporate debt is bought and sold.
Point Break Capital Management led the equity fundraising, with significant investment also provided by tech-focused private equity firm Motive Partners, which recently sold a 24.9 per cent stake in itself to Apollo Global Management.
Other marquee Wall Street names also provided cash, including Senator Investment Group and TPG Capital, as well as large asset managers BlackRock and T Rowe Price. The exact share of the fundraising stemming from each investor was not disclosed.
The fundraising valued Trumid at about $2.4bn, the company said.
The deal comes after the coronavirus pandemic prompted a rapid shift to electronic trading platforms in the corporate bond market, as bankers and investors unable to access their sprawling trading floors for months sought out new means of transacting.
Electronic trading has grown from about 30 per cent at the start of 2020 to 40 per cent this year for investment-grade rated bonds, according to research group Greenwich Associates.
According to Trumid, notional volumes traded on its own platforms have surged more than 70 per cent so far this year, taking its market share of US electronic trades in the corporate bond market higher than 10 per cent for the year to August, according to Greenwich.
“Behaviour has changed in the credit market,” said Michael Sobel, president of Trumid. “The market was forced, like all sorts of other things, to adopt technology during the pandemic. We think it is indicative of a steady march of this asset class to a more mature market structure.”
Trumid currently offers users two ways to transact corporate bonds.
The first is an anonymous model that allows all participants on the platform to trade with each other by submitting offers to buy or sell a security that only becomes known to other traders who have submitted offers to engage in the same trade.
The second trading “protocol” mimics the relationship between dealers and their clients, allowing name-disclosed trading between banks and investors that have a pre-existing relationship.
The fresh funds are earmarked for new ways of trading as Trumid hopes to take advantage of the recent interest in electronic venues, as well as plans to expand trading in emerging market debt.
The Securities and Exchange Commission has also taken an interest in fixed-income market structure, with new head of the agency Gary Gensler seeking to increase transparency and efficiency in the market.
“We are engaged in the dialogue and think the long arc of this is very positive for fixed income,” said Sobel.