Liquidnet’s system will allow investors to receive deal announcements and updates as well as place orders and receive allocation and pricing details. The company already runs a platform for trading existing bonds in the secondary market used by more than 1,300 investors who it aims to attract to the new product giving access to the new-issues market.

Any potential conflicts that may arise from having investment giant BlackRock Inc buy corporate bonds and commercial mortgages on behalf of the Federal Reserve are being managed “extremely carefully,” Fed Chair Jerome Powell said on Wednesday.

Even though legitimate criticisms of exchange-traded funds persist, data shows that investors used ETFs to help them get through the worst of the dysfunction in this year’s credit markets.

“The secondary market for corporate bonds is growing and is ripe for an evolution, but existing platforms are not fit for purpose. Data is monetised by platforms and it is leaked across fragmented, opaque markets, decreasing execution quality. Working with the industry, we will build a platform that solves the challenges of locating and promoting liquidity and data ownership once and for all.”

“It does sort of make you wonder if it makes sense for them to be buying bonds of Apple. Spreads are so tight and stocks are doing so well. You wouldn’t think they would need support from the Fed,” said Kathy Jones, director of fixed income at Charles Schwab. “The reasoning I guess makes sense. But when you look at the outcome, you scratch your head and wonder whether this is where we need the money to go.”

Portfolio trading, powered by the ETF boom, was gaining converts as markets in many individual bonds all but froze. Transactions cleared by Tradeweb Markets Inc.’s electronic platform have doubled from a year ago, reaching a cumulative $90 billion globally last month. That’s already more than in all of 2019, and puts Europe on track to surpass Wall Street’s tally from last year, too.

Initially, the SMCCF was structured to hold two types of investments, “Eligible Individual Corporate Bonds” and “Eligible ETFs”. Yesterday, the Fed introduced a third category: “Eligible Broad Market Index Bonds”. This new category allows the Fed to immediately begin buying individual corporate bonds in much larger volume than previously anticipated.

Corporate treasurers retain the ability to sway conditions in key markets. Their role has taken on a renewed importance given the mass issuance of global government and corporate debt sparked by the pandemic shock. 

These new programs rely on pre-2008 assumptions about market structure. The biggest financial players have a much smaller footprint in the markets than they once did, and the 24 Primary Dealers with whom the Fed currently trades make up a much smaller share of the trading market. The pulse of the financial markets now extends beyond the old Wall Street stalwarts

Carney compared what was happening in the corporate-debt markets to the subprime-mortgage boom that culminated in the great financial crisis of 2008 and 2009. Citing the rise of “covenant lite” loans that placed very few restrictions on corporate borrowers, Carney said, “The subprime analogy isn’t perfect, but it’s on the road to ‘no doc’ underwriting, which happened eleven years ago.”