ValuBond Securities Inc. says that by sometime next month its retail online bond trading service will be available to customers of 40 financial services providers - from giants to Internet start-ups.
That is a jump, and should give a big boost to a market that has lagged behind stocks, the Atlanta company says.
The new providers will include banks, insurers, securities firms, and independent broker-dealers, the company said last week.
"Bonds are exploding right now," said Lisa Edwards, its president. "Baby boomers are buying bonds now as they restructure their portfolios."
Several factors have held bond trading back, she said. One was the lack of anonymity in trades, "Buying bonds used to be like buying a used car," she said. "There was a lot of friction on both sides, and you were never sure if you got a fair price."
Another was slow processing of trades, she said. "Investing in something slow and steady doesn't mean the investing process has to be that way," Ms. Edwards said. "This is the less sexy cousin of day trading." (She added, though, that "you aren't going to sit there and trade bonds like you do stocks.")
Still another problem is lack of knowledge among consumers, Ms. Edwards said. Baby boomers "are confused by the process," she said. "We want to provide them with the tools to learn about the investment and capability to trade." ValuBond offers market research and the trading service includes automated portfolio management.
In addition to providing trading in existing issues, ValuBond provides access to new ones. Since August, ValuBond has sold $43 million in new-issue retail bonds.
The site was launched in June, in a partnership with Charles Schwab & Co., which has sold $25 million in retail bonds through the ValuBond connection.
John Ladensack, senior vice president for fixed-income at Schwab Capital Markets and Trading, said the relationship has been beneficial for his company and its customers.
ValuBond lets customers "use the Web to invest in a much larger variety of new-issue and secondary fixed-income products," he said.
Ms. Edwards said banks are intrigued with the service because it enables them to offer bonds without having to hold them.
"Banks can go out and get competitive pricing for a bond product for an investor without the risk," she said.
"For us," Ms Edwards said, it is important to get these products to the customers who are interested in it and connect them to the individuals that are selling."
ValuBond provides a "Chinese menu" of options for financial companies, she said. For banks with Internet access, ValuBond can set up a link for investors to use the online service for research and investing. Customers of banks that are not online can go to a bank broker who can access ValuBond for them.
"We can offer all of our customers exactly what they want," Ms. Edwards said. "We want to make dealing with a firm with 10 employees as easy as dealing with Charles Schwab."
Analysts said ValuBond is changing the market. Todd Eyler, a senior fixed-income analyst with Forrester Research in Boston, said the service is unique because it offers investors real-time access to bonds.
"What they are doing is incredibly smart," he said. "Most other online platforms for bonds are reselling services or quote services. This offers more." Instead of building its own branded marketplace, ValuBond is "going through banks and other access points that customers are already using."
"Bonds are not sexy," Mr. Eyler said, "but when any business is done right, it doesn't matter how sexy it is if it makes money for your customers."
