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GTT, which has built its name as a vendor of fixed-income trade order management systems, plans to offer access to Merrill's bond inventory to its retail broker/dealer-dominated client base.
Merrill, of course, already distributes components of its fixed-income inventory through a handful of multi-dealer, online bond consortiums--including BondBook, TheMuniCenter and TradeWeb. Moreover, Merrill's clients cans also tap into the firm's inventory via either MLX.com, its institutional portal, or its traditional trading desk.
But the deal with GTT is unique because, in addition to providing customers with access to Merrill's inventory, the vendor markets an independent trade-order-management system that gives clients the power to execute trades. So, if clients want to tap into Merrill's inventory, and then decide they want to buy or sell a specific product, they can do so using GTT's so-called Broker/Dealer sales and trading system.
Noting that the deal is not an exclusive for either party involved, GTT founder and CEO Peter Adams says the vendor wants to eventually offer a low-cost, neutral distribution channel that provides clients with access to the fixed-income inventories of multiple "major" market makers. "A regional broker/dealer or an investment manager is unlikely to trade off of an exchange or a distribution channel that is owned by one major market maker. However, they're much more likely to participate in a neutral channel that aggregates and distributes inventory from many different market maker sources," he says.
Though it only recently went live with its delivery mechanism, the GTT Web Services hub, GTT is already providing access to Merrill's inventory to a pair of clients: FleetBoston Financial's Quick and Reilly and US Clearing units. Adams says GT has already installed GTT Web Services in support of the full complement of fixed-income traders at Quick and Reilly and US Clearing. Moreover, he says, the firms plan to roll out the platform on the desks of their brokers nationwide "over the next four to five weeks."
Merrill Lynch executives could not be reached for comment at press time. However, a company spokesperson says the firm was pleased to form an alliance through which it could "expand distribution of its inventory." Merrill, he says, was enticed, in part, by GTT's status as a successfully technology vendor, and the firm "absolutely" expects to form similar inventory alliances with other order management system providers down the road.
The products covered in Merrill's pact with GTT include corporate bonds, agencies, strips, treasuries, CMOs, and asset-backed and mortgage-backed securities.
In addition to offering an integrated trader order management/inventory distribution solution, Adams says, GTT also provides electronic links to major back-office system vendors. Through these interfaces, he says, clients can perform straight-through processing of trades.
