Corporate bonds now available on LSE for electronic trading
The London Stock Exchange (LSE) has today launched electronic trading for corporate bonds, as part of their drive to diversify their business.
The new service has started with access to ten household name corporate bonds, made accessible for retail investors.
This overcomes the previous barrier to investing in individual corporate bonds which typically have a £50,000 minimum investment. Trading electronically, the minimum investment will be £1,000.
We think this is a very positive step in reducing the bid/offer spread which currently exists for smaller denominations of corporate bonds. It also makes this market easier to access for a wider market.
Of course, the bid/offer spread will only ever be as good as the number of people using the system. This system needs volume and take-up.
The risk of this asset class is somewhere between cash and equities, depending on the individual company and their credit risk. Bond holders rank above equity investors in the event of a company collapsing.
Many investors will continue to gain exposure to this asset class through collective investment funds, where they benefit from economies of scale and expert fund management.
