Newport Beach, Calif.-based Tradebonds.com, an online fixed-income trading system launched in May, plans to equip its site with portfolio management features by the third quarter of 2000. At the same time, NASD broker/dealer Finacorp Securities-Tradebond.com's parent-is seeking minority investors for the system and is pondering an expansion into Europe.
Ed Prado, president and CEO of Tradebonds.com, says Finacorp's system is targeted at small to mid-sized institutional investors and high net-worth individuals who want to get bond research, analysis, news and execution capability over a single Web site. Finacorp will also be adding portfolio management software to that mix in 3Q 2000, says Prado, in an attempt to lure more investors to the site and boost volume.
"The portfolio management feature will enable clients to upload their current portfolio to our site and manage it online in a secured area," he says. "We expect that to foster client to client interaction, in that if there is a client that is looking for a bond, we can message the client that has the bond and show him a price for that bond."
While noting that Tradebonds.com also offers a bond calculator and a real-time Treasury ticker, Prado says the system currently exclusively covers U.S. bonds, including corporates, municipals, CMOs, agencies and treasuries. But Finacorp is thinking about expanding the system to cover British bonds. "The U.K. would be a good candidate for a system like this, and I think that maybe the way we get there is through an alliance with a U.K. firm that understands that domain," says Prado.
In addition, Tradebonds.com is seriously considering extending its coverage of the U.S. fixed-income market. New issue bonds, benchmark agencies and convertible bonds all may be added to the site's U.S. coverage in the future, says Prado.
Tradebonds.com also expects to make an announcement about its first round of external financing within the next six weeks. Prado says that Finacorp is looking to sell minority pieces of Tradebonds.com to both venture capitalists and software companies. After the first round of financing is completed, Tradebonds.com expects to engage in a second round, and then perhaps either "go public or get acquired," he says.
If some company were to acquire Tradebonds.com, it would be taking over a system that is still in the early stages of its technology development. Clients can now buy bonds via Tradebonds.com, but the system does not yet allow them to sell bonds. Prado says that selling capability will be introduced in next year's third quarter. Around that time, Finacorp also plans go live with a straight through processing (STP) feature.
Today, investors who want to purchase bonds via Tradebonds.com must first open an account with the vendor and then send the vendor a purchase order. Tradebonds.com will then eyeball a client's account to make sure they're credit-worthy before electronically sending a message to its traders. The traders then "execute the order over the phone through a corresponding broker/dealer," explains Prado. But once STP is in place, he says, Tradebonds.com will be electronically connected to the trading desks of "a dozen or so brokers," eliminating the need for the trader to phone the broker.
Tradebonds.com makes money by charging clients a fee for buying bonds. Aside from that fee, which is based on an "internal pricing matrix," all other services offered over the site are free for clients, says Prado. "Our philosophy is to create a community, and the quickest way to create a community is to offer something for free which has value," he says.
Thus far, however, Tradebonds.com free services have not led to big trading volume. The site is currently receiving one million hits per month, but the number of people buying bonds via the platform is "not significant," says Prado. The dearth of buyers can at least be partially attributed to Y2k technology freezes implemented by several institutions, he says. But Prado expects volume to increase after Tradebonds.com implements its technology upgrades.