Bonds away !!
Online fixed interest trading is slowly becoming a reality as Goldman Sachs, Merrill Lynch and Morgan Stanley Dean Witter release plans to establish a global bond market Electronic Communications Network (ECN). ECN’s are off market exchanges that have allowed after hours trading of stocks listed on NASDAQ. The largest of these is Instinet, owned by Reuters.
According to Bloomberg.com, electronic trading networks grew from 11 to 39 in the space of two years and electronic trades accounted for 6 percent of the $US13.5 trillion fixed income market last year. Additionally, Bloomberg claims there are some 4 million fixed – income securities worldwide compared to about 10,000 listed stocks.
Locally, Yieldbroker.com, a venture between Deutsche Bank, Salomon Smith Barney, Westpac, UBS Warburg and Molten Markets, announced it will allow real time online research and pricing for fixed income securities in the Australian and New Zealand markets. The service is available to clients of the founding institutions.
Obviously the demand is there, so why has it taken so much longer to develop online trading facilities for fixed interest securities as opposed to equities ? The variation in maturities, credit qualities and types of debt securities has made them more difficult to mold into standard formats for online trading.