TradeWeb, an electronic bond trading system that is owned by a consortium of the industry's largest bond dealers, was named the winning bidder by The Bond Market Association in response to an RFP that it published in March. TradeWeb volunteered to develop a series of standard protocols to be used for electronic bond trading and whose ownership will be in the public domain.
To make sure that the project stays on track, TBMA selected the management consulting firm Jordan and Jordan, which was instrumental in the securities industry's Y2k testing efforts, to serve as the project manager and handle administrative details, says Joseph Sack, senior vice president of TBMA.
"We have definitely built an industry-wide spirit concerning this initiative," says Sack, adding that, "TradeWeb is the perfect technology piece that we need in order to round out our team."
Ten proposals were submitted by various financial technology players, according to a report in The Bond Buyer, which said the proposals also included two information providers: Bloomberg and MoneyLine Network; two clearing firms: the Depository Trust and Clearing Corp. and SWIFT; and four software developers: Javelin Technologies, integrasoft, Random Walk Computing and Xbond Corp.
A combination of factors led TBMA's Online Bond Steering Committee to choose TradeWeb, says Sack. He cited its experience in running an alternative trading system and its offer to assign "the full-time equivalent of two technology professionals for at least a six-month period" to work on the development of standards and computer protocols as among the factors.
Comments TowerGroup Senior Analyst Andy Nybo: "The fact that they're willing to devote two full-time people to this effort for a period of six months without any compensation means they think this is sufficiently important, and will help them expand their business and improve the way they do things." However, Nybo also pointed out that "TradeWeb has a vested interest in the protocol being developed. They can use it to integrate their system with order management systems, processing systems, clearing systems, settlement systems. Anything that can help them get the disabled straight-through processing equation straight is enormously valuable to them," he says.
Consortium Pick: No Surprise"The owners of TradeWeb are the biggest guys on the Street," says Nybo, who says he is not surprised by its selection. "I figured it would be one of the larger platforms in the debt markets with consortium backing. The consortiums have deep pockets and are probably on board as far as TradeWeb doing this project with TBMA.
"It has a proven track record and has been active in the TBMA and in the whole straight-through processing area. It's one of the more technologically astute firms out there." TradeWeb is the most liquid online bond-trading system for Treasury securities (though Sack says this alone was not a determining factor). It's owned by a consortium of 13 major bond dealers and is connected to more than 700 of the largest buy-side institutions as customers. Recently, TradeWeb has expanded into trading agencies, commercial paper and European sovereign debt. "They have a built-in consortium of interested parties that want to have input into the whole design of any potential protocol," says Nybo.
Several of the TradeWeb equity owners are members of TBMA's online bond steering committee--including Lehman Brothers, Salomon Smith Barney, Goldman Sachs and Merrill Lynch--and these firms are also driving forces in the Fix for fixed income committee's work.
But the FIX for fixed income committee also represents a cross- section of buy-side and sell-side firms, including American Century, and Putnam. In addition, developers such as Javelin Technologies and electronic trading platforms such as Bond Book LLC and Market Axess are listed on the Web site as participants in the FIX for fixed income working group.
These firms that have built a lot of infrastructure around using the Financial Information Exchange (FIX) protocol and were concerned about the TBMA's RFP to select a contractor that may or may not propose FIX, according to sources. TradeWeb is a member of the working group committee that is adapting the FIX standard to trade fixed income securities. "We have said from the very beginning that this was not about embracing FIX, it's about mobilizing the industry," says Sack.
"While the technologists probably care more about the protocol's brand, the broader view of the industry is 'Let's just make sure we have something that everyone can utilize, that will apply across the board and that is in the public domain,'" he says. Sack adds that TradeWeb had recommended using the FIX language in its proposal and that it's definitely going to start with FIX to develop the standard language for bonds. "We've encouraged them to turn to FIX, figure out where FIX is and determine how we're going to cooperate with FIX to continue the process that they started," says Sack.
According to Sack, members of the FIX community had an opportunity to read the proposals, as did the Asset Managers Forum--a buy-side organization whose members are 40 large fixed-income asset managers--before a decision was made.
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