The Financial Times reported this week that BlackRock is planning to build a global trading platform that will reduce costs for institutional investors by buying and selling shares internally rather than relying on Wall Street firms.

According to media reports, BlackRock plans to develop a “new world-class global trading platform across the firm,” which cites an internal BGI memo.

The timing of the memo coincides with BlackRock’s acquisition of Barclays Global Investors (BGI) for $13.6 billion. When the deal is completed in December BlackRock will manage $3 trillion in assets and rank as the world’s largest asset manager.

BlackRock is tapping Minder Cheng, BGI’s global chief investment officer of equity and capital markets, to lead the effort, according to the memo, whose contents were published by news outlets including the FT and Bloomberg News.

As reported by the FT, the platform will “fully realize the cost efficiencies and trading opportunities across all asset classes as we become one of the largest trading operations in the world,” which quoted from the memo.

While plans are in their early stages, according to the FT, the idea is that if clients of BlackRock are selling securities and some are buying the same securities, they could cross them internally without paying commissions and the bid-offer spread.
BlackRock reportedly doesn’t intend to charge any fees for this service, since the whole point is to save them money, according to sources cited in the FT article.

The move to develop a crossing system makes perfect sense for BlackRock, a buy-side asset manager, known for its securities and portfolio analytics and risk management technology in fixed-income securities, which it provides to its clients via BlackRock Solutions. During the financial crisis, BlackRock served as an independent adviser to many of the troubled banks and brokers as well as governments on how to dispose of debt that had fallen value.
The combination with BGI's quantitative technology infrastructure and systematic approach to transaction cost analysis, is bound to strengthen BlackRock's clout in equity trading.

In a recent interview with Wall Street & Technology, BlackRock executives didn’t mention the global trading platform but they indicated they would be doing more with trading analytics in the future and that this is an area that BGI is very sophisticated in.