NEW YORK (Reuters) - German exchange operator Deutsche Boerse Group (DB1Gn.DE) has made a $10 million investment in Trumid, a New York-based financial technology startup that runs an electronic corporate bond trading platform, the companies announced on Monday.
Trumid, which is backed by venture capitalist Peter Thiel and investor George Soros, will collaborate with Deutsche Boerse to develop products and services for the European market.
Deutsche Boerse's investment is an add-on to $28 million raised by Trumid earlier this year from investors including Chinese financial firm CreditEase.
Founded in 2014, Trumid is one of a spate of electronic bond trading platforms set up in the past few years to help to ease a liquidity crunch in fixed income markets.
Stricter capital requirements imposed in the wake of the 2008 financial crisis have made it more expensive for banks to act as market makers in corporate bonds, making it harder for asset managers to trade.
Trumid, which acquired competitor Electronifie earlier this year, hopes to facilitate trading by enabling asset managers and brokers to transact directly and anonymously with one another on its platform.
The company plans to expand into Europe to extend its offering to its 350 institutional clients, many of which operate globally.
"There are imminent catalysts for the increased adoption of electronic trading in Europe," Mike Sobel, Trumid's president, said in an interview. He said to enter the European market in partnership with Deutsche Boerse was a great opportunity.
This is not the first time that Deutsche Boerse has taken an equity stake in a fixed income trading startup, having backed London-based Bondcube in 2014. Bondcube, however, filed for liquidation in July 2015, three months after its launch.
“Trumid has already proven its ability to create a new transparent, electronic and efficient credit and bond market place in the U.S.,” Hauke Stars, Deutsche Boerse board member, said in a statement.
Many of the bond trading platforms launched in the past few have struggled to gain significant traction, in part because of their inability to persuade buyside traders to negotiate prices with each other, in a marketplace where they were traditionally used to letting brokers negotiate prices on their behalf.
As many of the platforms make money by charging fees on executed trades, their revenues rely on engaged traders and successful negotiations.
"We have demonstrated a real track record of capturing client orders and turning them into trades," Sobel said.
Roughly $1 billion worth bonds were traded on Trumid in the month of June.
Reporting by Anna Irrera in New York; Editing by Lisa Shumaker and Jane Merriman