GOVPX Inc., the government-bond <
pricing service, was founded nearly a year ago to provide real-time pricing information on U.S. government securities.
The firm gets its data from five of the <
six interdealer brokers and distributes through Reuters and other financial news services in the fixed-income market. Based in New York City, GOVPX is privately held by the five interdealer brokers and 42 bond dealers.
Company officials are tight-lipped <
about the firm's financial performance, but they say it recently moved into the black.
Larry Jones, president and chief operating <
officer of the firm, has been active in negotiations between the industry and members of Congress to craft legislation re-authorizing the Government Securities Act.
The industry is trying to convince <
Congress that with GOVPX and other pricing services, there will be plenty of information available to the broker-dealer community and investors.
In the following interview, Mr. Jones <
talks about the business side of GOVPX and addresses the firm's continued opposition to a bill backed by Rep. Edward Markey, D-Mass., that would give a role to the Securities and Exchange Commission in assuring "price transparency" in the market.
Q: GOVPX got started less than a <
year ago. How do you assess your progress to date?
A: We are approaching our one-year <
anniversary in June, and we have well over 1,000 terminals installed. We think it's been very successful in its first year, given the fact that we distribute the information through six of the major information vendors in the fixed-income market.
We also have over 15% of our terminals <
outside of North America, giving us a decent international base which we can grow from.
Q: Your main competition is Cantor, <
Fitzgerald/Telerate. Are you winning against them in terms of market share?
A: The race for market share is a <
long and hard road to overcome the size of a Cantor and Telerate. However, we know we have a far superior product, given the number of contributors we have and the number of distributors that we distribute our product through.
We feel very comfortable about <
our competitive prospects. We do not discriminate in terms of whose data we distribute or who we distribute our data through. Therefore, we feel, unlike the competition, that we truly represent the transparency goals that the current legislation is targeted at.
Q: Would you explain that <
A: Unlike our competition, we supply <
information from a lot of contributors, five of the six interdealer brokers. We have publicly stated that we will take anyone's government-securities pricing information and add it to the feed to give the investor a better view of the market: best bid, best offer, more volume information about the industry, and so on.
And we've committed to distribute <
this information in various formats that allow the investor to do anything from analytics to end-of-day pricing to just looking up the price of a bond. We think that is unique to the industry, while Telerate is traditionally page-based, [uses] one contributor, and distributes to a very select crowd of people.
Q: What do you mean by page-based?
A: Their information is a series of <
prices that are put on a page and intended primarily for view-only use. They have some analytical products, but if you look at the majority of their base users, the majority is page-based.
What the industry really needs is <
analytical products, which we sell. Our information is in the feed format, which allows the vendor and the end user to use that data more flexibly.
Q: I understand that in the fall <
you're planning to offer subscribers the new service of a digital feed. What is it and how does it work?
A: One of the goals in transparency, <
which both the government and we support, is the availability of government pricing information in a raw form to be used in graphics, analytics, and other applications. Our new digital product will allow the vendor as well as the end user to use the data flexibly in these kinds of applications.
We will continue to offer our page <
format for people who want to view pages of information, but we have heard clearly from the marketplace that digital access to the information is most desirable.
Q: Why is that?
A: With page-based service, the <
prices are displayed in tabular form. In order to take a given price for a 30-year bond and use it in a graph, use it in a bond calculator, or use it in a historical data base for looking at time-series information, a user would need what's called a page shredder to be able to pull the information.
A digital feed gives [subscribers] <
quotes on these products that they can use in spread sheets, in calculators, in graphs.
Q: So the user is better able to understand <
the price of the bond?
A: The user not only understands <
the price of the bond, but the impact of the price of the bond on the portfolio, or the historical view. The information can be used to convert a price to yield, to price, or applied in other types of analytical forms that currently are widespread in the industry.
Q: You're also planning some other <
services, aren't you?
A: We're looking at two other types <
of expansion. One is to add different instrument types beyond Treasury securities. Although we don't have formal approval yet, we are aggressively pursuing nonmortgage-backed agency securities and zero coupon bonds on our service.
The other service we are looking <
at is the end-of-day pricing, allowing closing prices to be distributed through existing vendors to clients for use in pricing their portfolios or mutual funds.
Q: What do you think of the House <
telecommunications and finance subcommittee's bill that would allow the SEC to collect price information?
A: First, although it has cleared the <
committee, I think we're a long way from the end of the battle. There are still a number of steps to go before a final bill gets out of the conference of both the House and the Senate.
Our position continues to be that <
we believe major progress has been made by the industry, primarily around the conception and success of GOVPX in creating transparency in the industry, and that the SEC authority is quite unnecessary at this time, even though it is defined as backstop authority.
We have been working very aggressively <
with the Congress to try to re-emphasize the progress that has been made to date, and have been quite successful in toning down both the authority and stiffening the conditions under which any SEC authority would kick in.
Q: Could you live with the Senate <
version of the bill, which requires only an 18-month study of price transparency?
A: Yes, we could, because we believe <
the industry and GOVPX are way ahead on the transparency issue, and 18 months from now there will clearly be no need for any authority.