The Finanical Times' Tracy Alloway and Michael Mackenzie report on the failure of new, independent bond trading platforms established by firms such Goldman Sachs, UBS, and Morgan Stanley to gain traction in the marketplace. To date, their combined market share is only 1 percent.
A major reason for the failure of the platforms to take off is that clients do not trust the banks that established them. Potential users are concerned that a bank would use information gained from the bond platform to their disadvantage. According to the story,
Market participants say that many components of the [Goldman] GSessions platform were innovative, but the bank failed to reassure investors sufficiently that it was not using data from the trading venue to inform its own team of traders and market-makers.
“Clients are very concerned about sharing information, especially giving up information to people who can use that information to their disadvantage,” said a banker at a competing institution.
While the failure of the platforms may reflect healthy skepticsm on the part of investors, the inability of banks to convince clients that they are not trading against them suggests something is deeply flawed.