Project Octopus
The new platform doesn’t yet have an official name, though the internal code name for the effort is Project Octopus.
Citigroup, for its part, is backing the effort through its spread products investment technologies group, or SPRINT, which makes investments in financial technology for the firm’s trading arm. Almost two years ago, SPRINT helped Citigroup introduce a new application for BWIC auctions. Since then, the lender has seen a more than 25% increase in the volume of trades it handles on the auctions.
“As time went by, we realized that the platform had peaked as a single-dealer platform since it can’t really change market-structure dynamics,” Kozak said. “That’s when we decided we needed to go out and invite other dealers.”
The new platform will use Citigroup’s existing technology, meaning much of the work ahead will focus on connecting the venue to other dealers and clients. In 2016, BofA launched Instinct Loans, an electronic platform for secondary trading of syndicated corporate loans.
“Between us and Bank of America, we have enough scale to make this something that is interesting and impactful on Day One,” Matt Zhang, head of the SPRINT group and Citigroup’s global co-head of structured products trading and solutions. “That’s why a lot of other dealers may like to join us.”
Data Costs
Wall Street’s biggest banks and hedge funds have grown vocal in recent years about the rising costs that third-parties charge for trading and market data. Sell-side firms spend about $140 million a year on such data, according to consultancy Greenwich Associates.
Costs aside, banks are sitting on a mountain of unstructured data tied to their sprawling CLO businesses, with no way to use much of it. Part of the aim with the new exchange is to allow banks to use more of that data, a move that should lead to lower costs, said Katya Chupryna, project lead in SPRINT.
“This is still a market that doesn’t have pre- or post-trade data capture,” Chupryna said. “What we’re creating is something that everybody on the sell side as well as the buy side will say that they need and want.”
This article was provided by Bloomberg News.