Fintech in the primary market can provide simplicity in the midst of uncertainty

Public offerings are slowly returning to the bond market as issuers come to terms with the volatility wreaking havoc on the market.

Although conditions may appear to be calm, uncertainty is still great. The main iTraxx Europe index of credit default swaps remains high, closing at 95bp on Monday – after spending the past two weeks hovering around one-year highs.

Meanwhile, swap rates have run rampant in recent weeks with double-digit intraday moves. And although these movements have stabilized, the uncertainty that underpinned them remains, albeit in the shadows.

This volatility and uncertainty permeating the market is a perfect opportunity for primary market fintech companies to draw blood and engage with the infrastructure of the bond market.

What these firms can offer issuers and retailers is simplicity. And when the primary market is so choppy, simplicity and a decent execution are essential.

Existing market infrastructure is a “Heath Robinson machine,” said one fintech CEO GlobalCapital shortly after SVB collapsed. “Simple requirements are handled through very complex processes that are the result of bolting together legacy systems.”

Through tasks as diverse as gathering essential pricing data or automating settlement and term sheet creation, fintech firms enable market participants to streamline the new issuance process, remove potential pain points and maximize execution certainty.

For any issuer hoping to weather a volatile market, choosing the right window and price is important. Firm, accurate and clearly presented market information is necessary to ensure that the best possible window is taken.

Fintechs, such as InterPrice which launched an integrated API this week, have carved out a niche for themselves as providers of consistent and immediate price information.

And when windows are slim, issuers must have access to accurate and up-to-date market information to ensure they get the best possible price for their paper.

For example, certificate issuers have used the data from InterPrice’s platform to navigate recent bouts of market volatility and lock in attractive funding costs.

But accurate information is only one part of the pricing puzzle. All the market information in the world cannot compensate for a sudden deterioration in conditions during the day.

When trying to price a deal against an uncertain backdrop, speed and efficiency are key to maximizing execution certainty.

Primary market platforms allow issuers to slim their settlement windows to almost an instant thanks to technologies such as blockchain issuance and term sheet automation. And as UBS’s latest senior buyback shows, a lot can change in T+6.

This crisis may have started in Silicon Valley – but fintech firms, and their cousins ​​at the Silicon Roundabout, have an opportunity to make the most of an uncertain and volatile environment. Fintechs have previously shown that they can simplify the new execution process. Now is the time to show how much value this can add.