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Electronic Bookbuilding To Launch In Chinese Bond Market

End-to-end electronic bookbuilding for bond syndication in mainland China is being launched next year by a joint venture between data provider IHS Markit and Hundsun Technologies.

The joint venture will allow syndicate banks to collaborate in real-time to publish new deals to the market, communicate terms and share other critical deal information in a standardized format that makes workflows more efficient. China is the world’s second largest bond market with an estimated 21.72 trillion yuan (more than $3 trillion) of bonds issued in the first half of this year according to IHS Markit.

Allen Williams, managing director for global capital markets at IHS Markit, told Markets Media: “For example, the platform pulls information together from across the banks for reconciliation. A process that used to take between four and five hours can now be done in 30 minutes or less.”

IHS Markit acquired bookbuilding capabilities through its acquisition of Ipreo which completed in August year.

IssueBook allows a syndicate to set up and manage multiple live transactions and can handle multi-tranche deals across multiple currencies and asset classes. The product connects with the firm’s other new issuance products, including IssueNet, which allows multiple banks to reconcile their order books and Investor Access, which enables investors to view deal terms and participate directly in deals.

Williams added that the first phase of the joint venture is due to be launched in the third quarter of next year and will focus on the domestic market.

“Chinese banks will have to be comfortable moving to an automated platform,” he said.

Hundsun’s customers include Chinese banks as well as securities and futures companies, funds, trusts, insurers, exchanges and private equities.

In later phases the joint venture will include cross-border deals as the IHS Markit electronic bookbuilding products are used globally. For example, IssueNet has been used in Asia since 2013 and more 50 Asian banks use the service.

Peng Zhenggang, chairman of Hundsun, said in a statement: “China is accelerating the pace of opening its market. Through the introduction of IHS Markit’s international experience and advanced platforms, we are excited to develop a best-in-class electronic bookbuilding solution for the domestic market.”

The Chinese bond market became more attractive to overseas investors after it was added to the Bloomberg Barclays Global Aggregate Index  in April, with its full weighting to be phased in over 20 months.

Investor Access

Herb Werth, managing director at IHS Markit, said in a blog in July that 42 banks and more than 300 investors have joined Investor Access since the platform launched just over two years.

“They are using the platform to analyse deals and place orders on over 90% of investment grade corporate bond issues in the euro and sterling markets,” he wrote.

He continued that Investor Access has to integrate with the technologies that each bank and investor uses.

“When you send a text message to a friend, are you concerned with the brand of phone they have, or the mobile network they are on? No” added Werth. “The idea that multiple services could communicate in a secure and standardised way is truly exciting.”

IHS Markit varies the core platform according to the client’s  workflow needs.

Werth said: “As a result, two things have happened: more participants are able to join this new platform in a way that is sympathetic to their existing workflows and technologies, and traditional methods can co-exist with the improved workflows, minimising disruption in the capital raising process.”