Bloomberg Tradebook, a global agency broker offering electronic access to exchanges around the globe via Bloomberg terminals, has added the Stock Exchange of Hong Kong (SEHK) to the list of markets it has direct access to, bringing the total to 12.
Tradebook began operations in the US in 1996 and now accounts for between 3%-4% of Nasdaq volume. It is consistently placed in the top three electronic communication networks (ECNs) in the US for shares traded each trading day. But Richard Lemmerman, Asia Pacific manager for Bloomberg Tradebook, says Tradebook is different from other ECNs, such as The Island, in that it focuses solely on institutional investors.
In its search of the deepest pool of liquidity for its clients it also doesn’t focus on order matching. “In Asia we feel that all the liquidity is down at the exchange, that’s why we go direct there,” says Lemmerman.
In 1999, in partnership with G-Trade Services, a wholly-owned subsidiary of the CLSA Group that provides execution and clearance services for non-US equities, Bloomberg started to expand its Tradebook service outside the US. It currently sees non-US transactions worth $3.5 billion pass through its system every day.
Unlike in the US, where ECNs took off because of the inefficiencies of the market making system, most Asian exchanges have a central limit order book (CLOB) and therefore only a single point of price discovery. This negates one of the major advantages that ECNs have enjoyed in the US, but Bloomberg Tradebook Hong Kong Manager Jay Moghe says Tradebook’s price, functionality and reach will make it popular with institutional investors everywhere.
In addition to anonymous buy/sell capabilities, users have real-time access to the top five best bids and offers via the Bloomberg Tradebook quote montage. Users also have access to order activity functionality such as order cancelling, audit trail and trade recap capabilities.
There are no additional hardware or installation costs for institutional investors that already lease a Bloomberg terminal, and the commission rate for transactions is negotiated on a case by case basis.
There is the issue of connecting the Bloomberg terminal to existing order management systems, but Moghe says that this is relatively straightforward due to the open architecture of the Bloomberg system and its use of common protocols.
By directly connecting from existing Bloomberg terminals to exchange systems for instant, reliable execution, Moghe says Tradebook can help reduce the cost of transactions, which will ultimately have a trickle down to the end customers of institutional investors, the individual investor. Lower costs will also help boost volume, says Lemmerman, quoting a study scheduled for publication by the Princeton University Press that found that if transaction costs in Europe were to fall by the same amount that they fell in the US between 1996 and 1998, transaction volumes would rise by up to 40%. 1996 was the year that ECNs began operating in the US.
Global execution network
Besides the 12 direct electronic exchange links, Tradebook also offers potential clearance and settlement in 65 markets worldwide through G-Trade Service's global network. In North America this role is played by B-Trade services, a subsidiary of Bank of America.
G-trade provides the electronic link between the exchanges and Bloomberg Tradebook and maintains a global support group to solve both trading and technical issues for institutional trading desks worldwide.
“With our link to Hong Kong now completed, the build-out of our Asian platform is proceeding as scheduled. By mid-year we should have electronic access to all the major market centres throughout Asia, which is something few firms can claim,” says Craig Lax, chief operating officer of G-Trade Services.
