AMERICAN investment banks face a new threat to their profits as BlackRock plans to launch a trading platform that would cut out Wall Street.
The world’s largest money manager has devised a platform which would allow it to trade bonds directly with the rest of its industry.
The electronic trading hub would be run by its Solutions business, BlackRock confirmed to City A.M. yesterday. It would give clients including sovereign wealth funds and other asset managers the opportunity to trade in areas such as corporate bonds and mortgage securities.
“If there’s savings available to clients, we want to give it to them,” Richard Prager, a BlackRock managing director and head of global trading, told the Wall Street Journal.
He said it would fill a gap in the supply of market liquidity rather than competing with or “cannibalising” US investment banks.
Yesterday a spokesman for the New York firm said the new platform is “an extension of BlackRock’s broader efforts to streamline trading and access liquidity across various means”.
It would match buyers and sellers of the same securities, known as “crossing trades” and BlackRock Solutions would charge a small fee for the service that would beat the price of ordinary Wall Street trading commissions. BlackRock is awaiting approval for the platform from the US Securities and Exchange Commission.
The move comes after steady criticism of Wall Street by BlackRock chief executive Laurence Fink. He has spoken out against the “spread” between a bond’s purchase and selling price while last year he warned against “turning our back” on the anti-Wall Street protests across more than 1,400 American cities.
In January BlackRock posted a 16 per cent fall in its fourth quarter profits as fees from investment advisory work fell away amid the global turmoil. It said net income dropped to $555m (£358.7m), or $3.05 per share.