Citigroup Inc. and Deutsche Bank AG have helped form a consortium to back a new electronic interdealer broker network that hopes to slash costs and make trades more transparent.
The network, which will operate in markets in the United States and Europe, is being built by BrokerTec LLC. The firm says it plans to launch a platform that will allow for the trading of Treasury coupons and Euro- denominated sovereign debt.
Though it remains unclear when the platform will be available, BrokerTec executives said they hope a global platform will be in place by next year.
Joining Citigroup and Deutsche Bank in financing the network are Credit Suisse First Boston, Goldman Sachs & Co., Lehman Brothers, and Merrill Lynch & Co.
The banks and investment banks behind BrokerTec clearly are hoping that the new system will supplant the varied and cumbersome approaches to interdealer trading currently in place.
Hal Hinkle, president and chief executive officer of the Jersey City- based firm, said that banks using the platform may be able to save money should the platform become the industry standard and replace current electronic and voice-based systems.
"What we've seen when this kind of system has been in place in other business lines is lower execution costs," Mr. Hinkle said.
Banks and brokerages also could benefit from global cross-margining, which allows margins-or collateral used for making trades-to be transferred rapidly from exchange to exchange.
BrokerTec was born in early 1998, the brainchild of Mr. Hinkle and Lee Olesky, the former chief operating officer for the fixed-income division of the Americas at Credit Suisse First Boston. Mr. Olesky is now BrokerTec's president and chief executive of European operations.
Mr. Hinkle, formerly of Goldman Sachs, was responsible for electronic commerce for fixed income, currency, and commodities there.
The BrokerTec platform is not the only one being developed, and its success will be measured by how many traders use the system, Mr. Hinkle said.
"We're not inventing" these sought-after efficiencies, Mr. Hinkle said. "But we are developing a fully integrated platform for dealers."