The London Stock Exchange (LSE) is to introduce an electronic order book for bond trading from February 2010.
The new order-driven trading service will be offered for a selection of UK gilts and corporate bonds. Testing for the electronic order book will be made available to the exchange’s members on 14 December.
According to the LSE, the new market will allow trading in retail-friendly order sizes, with continuous two-way trading provided by market-makers. Both gilt-edged and fixed interest securities will have their own segments on the LSE’s TradElect trading platform. Trades will be settled by UK and Irish central securities depository CREST, with post-trade information routed to Euroclear UK and Ireland via X-TRM, the LSE’s post-trade router.
The exchange says the service has been developed after strong demand from its retail client base for access to an on-screen secondary market in fixed income securities.
“London is a global centre for the listing and trading of debt, and in the current climate of low interest rates and equity market volatility, the retail appetite for bonds has increased substantially. This new initiative aims to meet that demand by offering private investors exposure to this market for the first time through transparent, efficient access to fixed income securities listed in the UK,” said Pietro Poletto, head of fixed income for the LSE Group, in a statement.
The level of UK government debt issuance is expected to increase due to the country’s £175 billion budget deficit. The UK government is expected to unveil a fiscal responsibility bill in the Queen’s speech later today, which may include plans to halve the budget deficit by 2014.