The London Stock Exchange today launched its new electronic Order book for Retail Bonds. Introduced in response to strong private investor demand for greater access to fixed income, it offers continuous two-way pricing for trading in UK gilts and retail-size corporate bonds on-exchange for the first time.

Initially, 49 gilts and ten corporate bonds are available for trading including securities issued by Tesco, BT, National Grid, GlaxoSmithKline, Morgan Stanley, GE Capital, Enterprise Inns and a bond issued specifically for this new service by Royal Bank of Scotland. Investors can see prices on-screen, and trade in increments as low as £1 for gilts and £1,000 for corporate bonds, in a process similar to share dealing.

The new market is supported by dedicated market makers. Evolution Securities has committed to a leading role and will make markets across all of the gilts and corporate securities on the service. In addition, Shore Capital Stockbrokers will make markets in corporate bonds and ABN Amro is committed to quoting in the new RBS bond.

The new initiative is modelled on Borsa Italiana’s highly successful MOT market which, with €230 billion worth of trading in 2009, is Europe’s largest retail fixed income market.

To mark the start of trading on the electronic Order book for Retail Bonds, the Exchange today welcomed key politicians and market participants to speak at its Paternoster Square headquarters.

The main characteristics of the new trading service are:

* It offers an open and transparent market model for trading in retail-size

- dedicated market makers committed to quoting will provide continuous tradable two-way prices in a range of retail bonds throughout the trading day

- all other registered member firms will also be able to enter orders into the book

- the new market model means private investors will be able to see prices on-screen and trade in bonds in a similar way as they currently do for shares

* Two new segments for electronically tradable gilt-edged securities (UK Gilts) and electronically tradable UK fixed interest securities (UK Corporates) on London Stock Exchange Group’s TradElect trading system.

* The trading day will be made up of an initial opening auction phase followed by continuous trading until market close. There will be no closing auction.

* All order book trades in securities admitted to the new segments settle in CREST. Routing of trade information to Euroclear UK & Ireland is carried out by London Stock Exchange Group’s post-trade router, X-TRM.

The new trading service is not expected to impact existing wholesale bond or gilt trading and trade reporting arrangements. It is not intended to change established practices in the institutional fixed income markets.