Magazine article American Banker

2 Firms Vie to Offer Junk Bond Trading on Internet

Magazine article American Banker

2 Firms Vie to Offer Junk Bond Trading on Internet

Article excerpt

A race is on to bring high-yield bond trading to the Internet.

Trading Edge Inc. of Santa Monica, Calif., said it plans to start up its system for trading the securities on April 15-about two weeks after New York-based Limitrader plans to begin a test run.

Both companies aim to let investors and dealers circumvent the traditional method of calling dealers to get price quotes on the securities known as junk bonds.

Trading Edge's BondLink and Limitrader's would let participants in the $550 billion high-yield market use the Internet to scan bid and offer prices in real time and to trade anonymously.

"We would be very happy" with a 1% to 2% share of the market over the next year, said Rob Stoner, director of sales at Limitrader.

High-yield bond trading is one of the last sectors of the fixed-income market to go on-line.

Last year, for example, New York-based TradeWeb LLC traded $170 billion worth of other types of securities, including U.S. Treasury bills, notes, bonds, and "strips"-securities that have been separated into tradeable pieces paying interest or principal. Its 500 users include Wall Street dealers like Credit Suisse First Boston, Goldman, Sachs & Co., and Lehman Brothers.

Development of Internet trading in junk bonds has been slowed by the market's relative illiquidity.

"The issues are just not homogeneous," said Andy Nybo, director of research at the Bond Market Association in New York. "Every high-yield bond has a story behind it. It's not conducive to a screen-based system, where you look at a security and say, 'Yes, I want to buy it. …

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