BondBook Hangs in the Balance

October 24, 2001( - The future of electronic bond trading company, Bondbook, which allows institutional investors to trade fixed income securities anonymously with each other, is hanging in the balance, according to a report from Reuters.

Members of the consortium that launched the system in June are deciding whether to cut financial support to BondBook, or find a way to reduce their costs related to the money-losing firm.

After the terrorist attacks BondBook suspended rules that compelled its backing investment banks to use the system for a set amount of trades every week.

Predictably, transaction volume fell and liquidity dried up – at a time when bond dealers, are looking for ways to cut costs in the face of a slowdown. And Bondbook is particularly vulnerable since most of the larger financial firms back more than one of the many competing electronic bond-trading systems.

BondBook dealer-backers include:

  • Goldman Sachs
  • Morgan Stanley
  • Merrill Lynch
  • Credit Suisse First Boston
  • Lehman Brothers UBS Warburg
  • Deutsche Bank and
  • Citigroup’s Salomon Smith Barney unit

Through the beginning of August 2001, only $10 billion in trades occurred over the system.