Just as Asia's governments talk about the creation of a regional bond market, the demise of Asian local currency bond trading portal, Bonds in Asia provides a cautionary tale.
KPMG has been appointed as liquidator after attempts to sell the business proved abortive. This signals the end for a portal that was backed by shareholdings from some of Asia's biggest banks, including Citigroup, Deutsche and HSBC.
The company stopped trading at the end of July and was actively seeking a buyer to rescue it, among what had clearly become a wrangle between many of its mostly bank shareholders. The six main shareholders were: BNP Paribas, Citigroup, CSFB, Deutsche, HSBC, and HkEx.
The exact reasons for the demise remain somewhat muddy, although the fact that each of the shareholders had a right of veto meant the attempts to sell it proved fraught with difficulties. An early sale attempt to a tech firm was vetoed by one shareholder to the utter shock of the five others, and then in a second sales attempt a second shareholder also caused complications by exercising a veto.
Was Bonds in Asia a victim of a shareholder tiff? Possibly. Then again, it may have been another of the casualties of SARS. As of March, the platform was going well in Hong Kong and was seeking to sign up local banks in Singapore. It was also set to launch a Taiwan business, and looking at establishing a G3 business.
After beginning trading in earnest one year earlier, it had captured 15% of Hong Kong volumes, and had become a favoured means of conducting business thanks to the anonymity it offered bond traders. It had put about $48 billion worth of trades through its system.
Then SARS led to a collapse in volumes, and consequently its revenues and a rescue plan had to be put in place. It was at this point that more deep-rooted difference at the board level became evident and over the next few months erupted into open feuding. The fact that each shareholder could exercise a right of veto meant that egos could run riot.
The fact that none of the shareholders had committed more than $5 million to investing in Bonds in Asia probably also meant that this was not the highest priority on many of the bank's radar screens
Its demise will be viewed, however, as a step backwards for Asia's local bond markets.