Australian Bond Exchange Offers Bond Market Exposure to Investors in ASX Listing Proposal

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The Australian Bond Exchange plans to list on ASX in late November or early December.

The Australian Bond Exchange (ABE) is set to join ASX later this year, giving investors access to the company’s growth potential in Australia’s $ 2 trillion bond market.

ABE plans to raise up to $ 10.4 million through an IPO from retail and wholesale investors.

The shares will be issued at $ 0.65, with the company planning to debut on the ASX in late November or early December.

This follows a raise of $ 8.4 million before the IPO through the issuance of 16.8 million shares at $ 0.50 each.

ABE was established in 2015 to create a bridge between the wholesale over-the-counter (OTC) bond market and the public and has seen “significant growth” since.

With an ASIC financial advisor license, ABE describes its goal as “leveling the playing field” in the bond market while creating greater transparency.

He notes that bond pricing is transparent and has no hidden, tracking, or custodial fees.

The proceeds from the offering will be used to acquire additional bond stocks and drive adoption of its technology, which is nearly complete.

Almost half of the funds raised will go to sales and marketing, and the focus of the business will shift from institutional to private investors.

The ABE solution

ABE created the Bond Exchange, which allows retail and sophisticated investors to access the OTC bond market and execute trades in a manner identical to stocks.

The company says its bond exchange has a very comprehensive list of criteria that a bond must meet before it can be listed – claiming its admission criteria are very stringent.

Using this model, clients can purchase bonds both online and over the phone.

Australian bond market

The Australian bond market was capitalized at around $ 2 trillion in July, with more than 3,000 bonds listed – which private investors had not been able to access so far.

Demand for bonds is forecast to rise 1.6% in Australia to eventually match the OECD average of 43.6%.

Wider access

ABE aims to expand the number of participants in the bond market, while reducing operational costs and credit risk.

Over the past two years, ABE has traded over $ 13 billion in bonds.

To enable this large commercial turnover, ABE has established strategic partnerships.

The company has partnered with Bond Advisor, a recognized fixed income resource company, which provides another eligible bond resource.

Another partnership is with the market information provider IRESS. This partnership provides a gateway for asset managers and retail advisers to carry out direct transactions in OTC bonds using the IRESS interface.

ABE claims to have made investing in bonds easier to access with a minimum investment of $ 10,000.

The company says its fees are lower than other companies as well, providing customers with higher returns.

Higher yield bonds

Investors typically focus on higher yielding bonds that generate yields of between 4 and 7% with maturities of two to five years, a part of the market well served by ABE.

ABE has also started generating yield-enhanced securities to meet investor demand for sustainable interest income in the current low rate environment.

The company operates mainly in the area of ​​corporate bonds, where banks and corporates are the main issuers.

Stimulate growth

The number of Australians over 65 is expected to rise from 16.2% of all Australians in 2020 to 24.4% by 2060.

Currently, around 15% of all Australian pension assets are in bonds, compared to the OECD average of 44%.

Most of this investment in bonds comes from pension and retirement funds.

The EBA says the OECD average shows “substantial leeway” to increase Australia’s retirement investments in notes and bonds.

In the self-directed super fund space, the value of bonds in the investment mix is ​​increasing – from $ 538.5 billion in 2014 to $ 822 billion in mid-2021.

Lower interest on low-rate term deposits is contributing to the anticipated rise in bond demand.

Grow the market

ABE has diversified business plans in the bond space. It aims to act as a bond exchange, advisor, liquidity provider, clearing house and custodian / registrar.

It has formed strategic partnerships to provide these services.

Financial performance

ABE’s revenue has grown rapidly since 2017 when it reached $ 430.9 thousand in revenue for the year ending June 2017 to over $ 5 million for the year ending June 2017. June 2021.

In fiscal 2020, total revenue was $ 5.9 billion, and it grew to nearly $ 9.3 billion in fiscal 2021.

The majority of income comes from gross trading margins and brokerage fees.


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