New fintech platform Overbond aims to disrupt ‘opaque’ bond market

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The Globe and Mail | Brenda Bouw | June 15, 2016

Overbond

Financial technology is changing how people borrow, save and invest, and is now infiltrating one of the stodgiest areas of financial services: the fixed-income market.

Overbond is a relatively new Toronto-based fintech with a cloud-based pricing communication platform that automates tasks for bond issuers and dealers, and is vowing to make trading more efficient and transparent.

Chief executive Vuk Magdelinic says the Overbond’s digital platform allows more dealers to trade at once, which helps to increase volume and offer greater pricing transparency.

The digital platform caters to the primary bond market, which is for bonds being issued for the first time.

Overbond is considered a “first mover” fintech in the Canadian bond market, connecting corporate and government issuers directly with dealers and investors.

Experts in both fintech and financial services say it was inevitable a platform would come along to shakeup the old-school bond market, where orders are still taken manually, one at a time, by phone and e-mail and tracked on spreadsheets.

Still, they caution Canada’s bond buyers and sellers may be slow to change their ways and adopt the technology.

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Mr. Magdelinic, who co-founded the company with fellow fixed-income expert Han Ryoo, won’t name the clients who have signed on so far, but says the issuers include a major power utility and a real estate company. He says Overbond is also signing a major Canadian bank on the dealer side.

The company recently closed a $7.5-million seed-funding round led by Morrison Financial. The sum is considered one of the largest in Canadian history for an early-stage company and a unique investment for Morrison Financial, which handles construction and real estate financing.

That funding is the first outside financing for the company, and will enable Overbond to beef up its platform. To date, Overbond has been largely bootstrapped by its founders, Mr. Magdelinic says.

He believes there’s huge pent-up demand for the platform in the bond industry, which he says is suffering from an “unprecedented” liquidity crunch. That’s due in part to increasingly strict regulations in the financial services industry, but also the antiquated, manual system of trading fixed-income securities.

“You need trades to understand how things move and at what price. If you don’t have trades, you can’t discover price. There’s no benchmark,” Mr. Magdelinic says.

Any technology that promotes transparency in the Canadian bond market is welcome, says Renée Colyer, chief executive officer of Toronto-based capital markets consultancy Forefactor Consulting.

However, she says Overbond will be challenged to penetrate a market well known for being opaque, especially in Canada.

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