June 25, 2024 — Although technology is transforming the way companies issue corporate bonds, the mechanics of distributing newly issued bonds remain far less electronic and automated than many believe it should be. 

“The buy side continues to want more from their new issuance management platforms, including OMS integration, access to a broad list of dealers and improved reference data, among other factors,” says Kevin McPartland, Head of Research at Coalition Greenwich Market Structure & Technology and author of The Corporate Bond New Issuance Process: A Buy-Side View. 

Overall, investors are divided on the impact innovation has had on the corporate bond new issue process, with 47% of corporate bond investors believing that technology has made the new issue process more efficient over the past year, and the remainder saying the status quo has not changed much, despite new technology offerings. 

“There are several reasons that investors might question the efficiency gains of recent innovation. For example, much of this market is still managed by spreadsheets shared via email and chat,” says Kevin McPartland. “Our analysis of market structure changes over the past decade suggests that when processes get better, trading desks are very quick to raise the bar—meaning today’s inefficient is yesterday’s efficient.”

Competition among technology providers is the primary driver of innovation in the corporate bond market—and will remain so going forward. While there are no fewer than seven trading venues competing for corporate bond volume, the fight to manage the buy-side’s new issuance management process is dominated by only three: Bloomberg, DirectBooks and S&P (formerly Ipreo). 

“The presence of a smaller and more focused DirectBooks competing with the scale and reach of Bloomberg and S&P has created a competitive landscape that will bring end users quicker innovations at lower prices than would otherwise be possible,” says Kevin McPartland. 

The Corporate Bond New Issuance Process: A Buy-Side View analyzes data on investor trading habits, dealer relationships, technology usage, and other market structure-related questions.