Are there too many screens in the Inter Dealer Broker market?
As IDBs-- intermediaries in the Treasury bond market--migrate to screen-based trading, the proliferation of proprietary trading systems is starting to exacerbate the fixed-income dealers that must watch five or more screens. That's the thesis behind OneBond.com, a new Web site with financial backing from PaineWebber Inc., that aims to consolidate the bid and offer prices across multiple fixed-income brokers and make it easier for brokers to trade with multiple IDBs. Paine Webber announced its agreement to be the initial investor in the Web-based system on June 20 when it demoed the system at the SIA Technology Management Show.
Currently, OneBond.com is focusing on Treasury markets, where the IDBs, such as Liberty, Garban-Intercapital and Cantor Fitzgerald are offering separate e-trading initiatives. Other contenders for linkage include Instinet Corp., which launched a fixed-income matching system earlier this year, and BrokerTec, a consortium of leading fixed-income dealers that are gearing up to compete with the IDBs. "The problem is we're going back to the '80s with multiple screens," says Scott Abbey, chief information officer at Paine Webber, who says OneBond.com will "let institutions interface with multiple IDBs."
Today, brokers such as PaineWebber and Merrill Lynch trade through the IDBs by voice. But the IDBs are moving to an electronic marketplace, says Paul Zajac, chief executive officer of Onebond.com, who was previously the head of fixed-income technology at the brokerage firm. The problem is they're all deploying independent systems with different function keys and buttons. Each dealer has to hook up to each IDB's application programming interface (API).
"Traders at the dealers started with three monitors, now they're up to five monitors," says Zajac, noting that "some are not platform independent, and run on a mix of Suns and PCs. An F1 function key on one doesn't mean the same thing on another system, he says.
The software is being developed in Java by Random Walk Computing, together with OneBond.com and with PaineWebber's bond traders. It will be fully Internet--enabled and require no additional hardware or software. The system can also be integrated into existing trading desk platforms, through the FIX connection, and would feed into a firm's back office or risk systems, says Zajac.
In order to create one consolidated screen, Onebond.com is interfacing with the multiple IDB systems. "Onebond.com is just a flow through to those systems," says Zajac, explaining that it doesn't execute any orders or charge any transaction fees.
Onebond.com will charge users on per monthly basis per trader. Though the exact charge hasn't been fully disclosed, Zajac says it will be in the hundreds of dollars a month per user. This is "a minimal fee that can easily pay for itself," he says, "because traders won't miss trades that they're missing now, because they can't get their mouse across five screens in time."
"Traders get the benefit of accessing all the liquidity across multiple InterDealer broker systems with one click," he says. Development staffs will also benefit, because the system supports straight-through processing (STP) through a FIX connection supplied by Onebond.com. As the trader executes, all the trades flow as a consolidated feed to the back office of the dealer. This eliminates the need for the dealers to interface with each of the IDBs and their proprietary protocols through a proprietary API, says Zajac who underscores the cost savings. "They have to have staffs, and a programmer has to be involved with each of the IDBs," he says. They need a contact at the IDB and they have to set up the network, separate machines and servers.
With Onebond.com, "all they need to do is hook up with Onebond's engine and as trades happen, straight-through processing will take care of it," says Zajac, who says the system will save the dealers money and require less support staff. IDBs will benefit, too, because they will need less development staff to support the dealers, and Zajac believes they'll attract more electronic order flow from the dealers.
Right now, Zajac says his priority is to deliver a product to PaineWebber as the first customer during the month of August or the middle of the third quarter. "We're working on that very hard to get that done," he says. In addition, Zajac is talking to a lot of potential customers. "We expect it will be used by a large number of dealers," says Abbey. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio