March 2007

Story below stating ICAP being in an acquisitive mood as their e-trading volumes continue to grow.

What’s to stop ICAP buying a B2C like TradeWeb? MTS have BondVision for example.

Would the banks be concerned? Too expensive? I’d like to see the likes of ICAP add value to the B2C market. It will have to happen if we are to move towards an exchange model where inter-bank & bank to buyside barriers no longer exist.


LiquidityHub (nee Project Hermit) had been all the rage in FI eTrading in late 2006, early 2007. They had their coming out parade at the SIFMA Conference in London this February, including CEO Bob McLeod being on a discussion panel about Swaps…..and yet since then……all quiet on the LiquidityHub front.

Why is this? Talk was of a Q2, 2007 launch on 3rd Party Vendor systems. Are we seeing grumblings behind closed doors by the consortium of banks? Nobody ever said getting all these guys to agree would be easy but with different classes of dealers (i.e. owner/participant and mere participant) this will have been made all the more difficult.

What if there is something else on the agenda?

I’ve picked up some vague but interesting talk in the market about an alleged “Project Fusion”. Essentially the alleged purpose of Project Fusion is the buy back of TradeWeb from Thomson. Rumours have gone around about TradeWeb being sold, to Reuters, back to the banks etc, etc, much of it mere speculation. This seems a bit more concrete.

Which begs the question……if this is true, what does this mean for LiquidityHub? Was it an elaborate tactic by the banks to drive the price of TradeWeb down? I’m told TradeWeb were not in the running to house LiquidityHub. Or has this merely been an opportunistic side effect of LiquidityHub’s existence? I suspect the latter, mainly because too much work has already gone into LiquidityHub and I can’t see the banks coordinating such a Hardball tactic between them.

Given a scenario of the banks buying back TradeWeb and deciding that LiquidityHub’s purpose can be served there, who are the biggest losers? Well simply, Bloomberg will be less than pleased. I understand they were in the hunt to be one of the LiquidityHub vendors and let’s not forget that SwapsHouse was skittled by LiquidityHub. Reuters was also allegedly in the running to be a LiquidityHub vendor and they certainly need a shot in the arm as RTFI has yet to make an impact in the FI eTrading space.

In terms of the impact on the buyside? Most Funds or HedgeFunds I’ve spoken with have, at best, only heard vague details of LiquidityHub. Subsequently if it didn’t happen they’ll most likely not be too fussed. Especially if they get increased Swap liquidity and Request for Stream via TradeWeb. In many respects, this makes life easier for them if they are a TradeWeb user.

Now this could all be market gossip and I, for one, hope LiquidityHub does start in the coming months. However keep an eye out for Project Fusion, it could make talk of LiquidityHub even quieter.

Article below on Finextra, where MAN are providing a system (by SDS Technologies) to Hedge Fund clients to trade, initially, US Repos. The plan is to add the bonds themselves and launch a European version later this year. No talk of which liquidity providers will support it……fairly fundamental part.

Interesting in that I’m sure much of the Hedge Fund interest in MTS has been driven by accessing repos, particularly on MTS Italy. Certainly Repos remain a a predominantly OTC product but just about everyone involved would love to see them go 100% electronic…..surely!

Are the likes of Bloomberg and Reuters really the best entities to provide e-trading platforms, versus execution specialists such as TradeWeb (I know they’re owned by a vendor but they are more TW than Thomson) or Market Axess etc?

Some, very cost conscious, banks would argue yes, on the back of not paying annual and per trade fees. Personally I have always had my doubts, ever since Bloomberg really made their big push into FI e-trading a few years back.

My main concern then remains now…..what is their motivation?

Essentially it appears they are all about maintaining terminal numbers through “value added” services like e-trading. Some say they also look for their transactions business to sell additional terminals, but which buyside is going to pay US$1,500+ a month for a trading system?

Bottom line is that the, certainly Fixed Income, systems they provide are quite disappointing. The functionality is basic, bordering on backward, the speed is average at best.

I have no axe to grind against these guys. It makes sense for a user to be able to access trading systems through a single terminal/application. However this only makes sense if the trading system is “best of breed”. In my opinion they are not!

The following story discusses the lack of operational automation at European Private Banks, across all asset classes.

From a Fixed Income perspective this is quite amazing. The amount of small tickets these guys write means there would be massive potential for long-term savings in processing costs – perhaps the margins they charge clients makes this irrelevant?

Needless to say their counterparties would welcome fewer failed small trades, the vast majority being on corporate bonds.