Bond Markets Ripe for Improvement

Fixed-income debt markets are highly diverse, with instruments defined primarily by their issuers (investment grade corporates, high-yield corporates, national governments and subnational governments) and their maturity (shorter-term paper and longer-term bonds).

In some cases, markets for retail and wholesale investors are also separate. Within each of these categories, bonds differ in terms of their seniority in the capital structure and, most importantly, the terms of the debt. As such, even in bonds from the same issuer, there is relatively little fungibility between issuances.

Market operations and functioning vary significantly across countries and types of instruments. In general, bonds tend to be traded over-the-counter (OTC), with some trading taking place on exchanges. While recent years have seen an increase in electronic trading, most trading involves orders placed telephonically with broker dealers.

Some markets are entirely or partially centrally cleared, while many instruments always settle bilaterally. Liquidity in bond markets ranges dramatically, from the deep and highly liquid US Treasury market to many syndicated corporate bonds that are held to maturity.

As with other asset classes, various institutions attempt to address these challenges through both end-to-end platforms and solutions that are more narrowly focused on specific components of the value chain as opposed to our approach to offering an end-to-end platform for the full lifecycle of the asset.

Challenges in Bond & Fixed Income Markets

Given the fragmented, over-the-counter nature of secondary market trading, bonds will significantly benefit from XDEX as they’re easier to transform into a digital financial instrument, without requiring wholesale market transformation.

  • The bond issuance process is highly manual and prolonged, with significant time required to issue and receive proceeds.
  • Because secondary markets are largely over-the counter, liquidity tends to be fragmented, with limited ability to accurately price trades.
  • Corporate bond markets tend to face limited secondary market liquidity overall, thereby limiting some investor interest and affecting cost of capital.
  • Trading processes are largely manual, leading to significant inefficiencies and poor data quality for all participants.
  • Relatively high minimum ticket sizes (given high transaction costs) exclude most retail investors.
  • All parties retain siloed data structures, calculating payments and other transactions independently using reference data, thus creating inefficiencies.
  • Extended settlement time frames add additional cost and risk.

How We Help Bond & Fixed Income Markets

Challenges that we specifically address through our solutions include:

  • Inefficiencies in issuance, trading and post-trade processes
  • Illiquidity in secondary markets and limited primary market issuance
  • Limited access to markets due to high minimum transaction sizes

Digital Bond Issuance and Distribution

Since issuance and trading infrastructure have high fixed costs, bond investments often have equally high minimum ticket sizes and transaction costs for primary and secondary markets. By tokenizing bonds and distributing them via XDEX accessible by retail investors (through which bonds can be fractionalized and traded with instantaneous, low-cost settlement), issuers can expand access to a wider group of retail investors.

Major changes from current state

  • Facilitate both issuing bonds directly to retail investors and secondary market trading among retail investors, without costs associated with legacy infrastructure and/or intermediaries


  • Enable a larger population of retail investors to both own and trade bonds
  • Potential to interact with broader financial and digital inclusion efforts (e.g. digital identity programs)

Bond Lifecycle Management

XDEX enables market participants and intermediaries to list or issue, trade, settle trades and provide custody services for digital assets – in this case, digitally native bonds – in a fully regulated environment. XDEX can exist in parallel to existing market infrastructure and existing bond markets, offering an alternative digitized version of standard bonds.

Major changes from current state

  • Introduce a single, shared source of truth on all aspects of the security, including terms, ownership and trade/ post-trade activities
  • Digitize bond terms, enabling programmability of securities from issuance (replacing document-based manual processes)
  • Potential for investors and issuers to interact directly with market infrastructure (or with one another)


  • Greater transparency for all parties
  • Reduce complexity in operations and/or operational burdens associated with reconciliation activity, thereby reducing transaction costs for all parties
  • Streamline and automate all processes associated with coupon and principal payments, clearing and settling and/or maintaining regulatory compliance
  • Issuers can list directly and have greater transparency of ownership, without relying on additional intermediaries, reducing costs to issue

Distributed Order Book

XDEX establishes the foundation for consolidating trade orders, where orders are visible only to potential trading matches across multiple liquidity pools. This reduces fragmentation and manual price/liquidity discovery in the corporate bond markets by creating a concentrated trading venue with minimal data leakage.

Major changes from current state

  • Rather than contacting multiple dealers to locate inventory/ trade matches, orders are routed through XDEX, where orders are visible only to potential trading matches

Proposed benefits

  • Reduce fragmentation in corporate bond trading (assuming sufficient adoption)
  • Allow better data controls, limiting leakage of trade information (and potentially allow participants to monetize their trading data)