NEW YORK BGC Partners Inc (BGCP.O) plans to launch a new electronic trading platform for U.S. Treasuries by the end of June, four years after selling a similar business to exchange operator Nasdaq Inc (NDAQ.O), an executive at the brokerage said on Tuesday.
The new platform has been three to four times faster in testing with professional trading firms than existing Treasuries trading platforms, such as NEX Group's (NXGN.L) BrokerTec and Nasdaq Fixed Income, formerly known as eSpeed, Lou Scotto, head of FENICS U.S. Treasuries, said in an interview. FENICS is the name of BGC's electronic trading operations.
Currently, BrokerTec dominates the electronic Treasuries trading business among interdealer brokers, with a market share of around 80 percent, according to Greenwich Associates.
That level of concentration at one firm has led various BGC clients, from multinational and regional banks, to proprietary trading firms, to ask BGC to reenter the market to spur competition, Scotto said.
"We understand our opportunity here and we are very serious about committing our economics and our technology to gain a quick hold in the market in the next year," he said.
BGC sold eSpeed to Nasdaq in 2013 for $1.2 billion in cash and stock considerations. At the time, eSpeed had a market share of more than 30 percent, but that has dwindled to around 20 percent, according to Greenwich. DealerWeb, run by TradeWeb, a company that is majority-owned by Reuters News parent Thomson Reuters Corp (TRI.TO), has around 5 percent market share.
Most new electronic fixed income trading platforms have little chance of making inroads on established players, but BGC may have an edge given its background and knowledge of the space, said Kevin McPartland, head of market structure research at Greenwich.
"Its a good thing for the marketplace that there is that innovation, but one of the hardest things in fintech to do is to build liquidity from scratch," he said.
BGC will offer a central limit order book for on-the-run Treasuries starting in mid- to late-June, with plans to launch trading in additional areas like off-the-run Treasuries at a later date, Scotto said.
BGC also plans to launch a electronic foreign exchange trading platform at a later date under the FENICS umbrella, he said.
(Reporting by John McCrank; Editing by Andrea Ricci)