A fintech platform looking to transform the trading of leveraged loans by doing away with phone calls launches Tuesday, the latest in a series of firms that aim to modernize the market.
(Bloomberg) — A fintech platform looking to transform the trading of leveraged loans by doing away with phone calls launches Tuesday, the latest in a series of firms that aim to modernize the market.
Octaura Holdings is an electronic platform that allows traders to buy and sell loans in the secondary market. It also offers analytics tools and later plans to add trading of collateralized loan obligations.
The company is one of several financial technology firms seeking to modernize various aspects of leveraged loan and CLO trading. Versana, a platform that provides a single location for investors looking to access portfolio data, launched operations in December. And in June, online platform KopenTech, which enables buying and selling of CLOs, started direct trading among investors.
Octaura’s focus is the secondary market, where investors buy and sell loans that are already in the market. That process is known to be slow, as traders usually must make a handful of calls to ask for quotes and then wait for banks to call back with their prices before selecting the best options.
“That’s 15 minutes outbound, 15 minutes inbound, altogether it could take maybe an hour to sell three to four loans,” said Octaura’s Chief Executive Officer, Brian Bejile, who previously traded loans and CLOs at Citigroup Inc. “That same process can be done on Octaura in five to 10 minutes.”
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Traders often have to cobble together deal data, such as “runs,” or lists of prices, from several sources as deal information isn’t standardized, said Tim Maloney, head of loan portfolio trading at Citi. Octaura puts all that information in one place, he said.
Octaura was formed in 2022 by a group of seven banks, including Citi and Bank of America Corp. The platform has been operating in a “beta” capacity for several months, with the first trades taking place in January.
A record $824 billion of loans changed hands in the secondary markets last year, according to the Loan Syndications and Trading Association. Bejile says the goal for Octaura is to command 2% of that in the coming 12 months.
Phone calls will likely remain part of large trades, whereas electronic platforms are useful for smaller transactions, which make up a significant portion of a trader’s overall workload, said Rebecca Willey, a senior loans trader at T. Rowe Price.
“A lot of the time you’re doing these smaller trades, and if it’s $500,000, do you really want to spend time in a chat room or picking up the phone when you could just throw it onto an electronic platform and have several people look at it?” said Willey.
Octaura currently has nine sell-side trading institutions as well as over 90 asset managers who are either currently trading or being onboarded, according to a press release. As many as 150 investors could be users on the platform by the end of the year, Bejile estimates.
–With assistance from Paula Seligson.
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