THE London Stock Exchange has launched a government bond trading service as part of the exchange’s ongoing efforts to diversify its business and reduce its reliance on share trading.
The LSE bond trading business MTS said yesterday the inclusion of government bonds, known as gilts, takes to 17 the number of European sovereign bonds on the system and “several leading international banks” had pledged to use the system.
“The launch of this platform marks a great step forward for the sovereign debt market, which continues to see a rapid evolution,” said Jack Jeffery, chief executive of MTS.
Jeffery, formerly a senior bond trader at ICAP, said the addition of bonds was timely, given the increased focus on transparency from regulators keen to cast light on the over-the-counter (OTC) markets.
“There is an increasing demand to trade gilts electronically, in a marketplace which improves on the efficiencies of voice broking,” said Jeffery.
Inter-dealer brokers such as ICAP and rivals BGC Partners, GFI and Tullett Prebon offer investment banks the ability to trade gilts over the phone or through electronic systems.
But authorities in the US and Europe are keen to force firms to trade on regulated systems in a bid to allow them to monitor OTC trading more closely for signs of major market events such as the collapse of Lehman Brothers in 2008.
The LSE and the OTC brokers are keen to establish themselves as system providers of choice ahead of the rules, which could take effect as early as next year. The launch is the latest in a series of moves by the exchange to diversify its business away from its core activity of UK share trading, a field where it has lost market share to rivals.
City A.M. Reporter