Asked to name the top electronic bond-trading platforms, most fixed-income traders wouldn't include the New York Stock Exchange, the leading "brand" in equities. But the NYSE, under the leadership of John Thain, has set out to change that with the upcoming release of NYSE Bonds, a trade-matching platform for fixed-income issues from" the companies that currently list equities on the NYSE.
According to John Holman, the NYSE Group's VP in charge of fixed-income trading, NYSE Bonds will use the matching technology acquired along with Arca in early 2006 by NYSE Group. Access will be available via the FIX 4.2 protocol or via gateways using technology from Townsend Analytics, Kestrel Technologies and Bloomberg, he relates. The system will replace the existing Automated Bond System (ABS), which dates from 1977 and was underutilized both because of its outdated technology and its limited inventory, Holman says.
"One of the things that kept ABS from growing was that under the 1934 Securities Act, for brokers to trade bonds on an exchange, each CUSIP [Committee on Uniform Security Identification Procedures] number had to go through a registration process, so the listings were simply done less often," Holman explains. "In November, we were granted an exemption so that if a company already lists on the exchange, we can trade their debt." This means NYSE now can trade about 6,000 corporate bonds. The intent is to eventually move into other fixed-income securities, such as the U.S. Treasuries market, Holman adds.
The only bond platform operated by a U.S. equities exchange, NYSE Bonds will differ from" typical over-the-counter bond trading, according to Holman. He points out that the system will offer firm quotes and immediate execution, similar to equities ECNs. Currently, nearly all bond trading relies on indicative prices offered by primary dealers, which then evaluate responses from potential buyers, as opposed to electronic equities systems, which match live buy and sell offers instantaneously, he describes.