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October 11, 2007

Investment Banks Buy In To Online Trade Platform

by Stewart Douglas

Story link: Investment Banks Buy In To Online Trade Platform

A Wall Street bank consortium has teamed up to acquire a substantial stake in an online trading platform which it is thought will revolutionise derivatives markets and credit trading subsequent to the turbulence experienced over the summer.

The consortium of leading investment institutions teamed up to offer $180 million for a stake in the Tradeweb platform which it is thought will mark the future direction of trading in the financial marketplace, an innovation brand of Thomson.  The move will see the consortium bag a substantial interest in the business of the company.

Among the substantial investors within the consortium, which read like a who’s who of investment banking, were Goldman Sachs, Morgan Stanley, Lehman Brothers, Merrill Lynch, JP Morgan, UBS, Deutsche Bank, RBS and Credit Suisse, suggesting that the platform is likely to make a significant difference to the way in which investment banks do their business.

The level of investment injected today puts a price tag on Tradeweb at $1.5 billion, even at a time where electronic trading is in its infancy.  The move has been seen by most market analysts to be a particularly good investment, with the platform experiencing rapid growth at present in the value of transactions it handles year on year as a result of the transition from traditional OTC trading methods.

The move comes just months after investment banks clubbed together behind LiquidityHub, a trading platform with similar functionality to Tradeweb.  Amongst the notable investors in that project were HSBC and newly RBS-owned Dutch outfit ABN Amro, amongst another 12 institutions which all pledged financial support.

The current receptiveness to electronic platforms and technology based trading applications would suggest a growing willingness for the market to move away from error-inducing ‘over the counter’ trade which sees invesment errors and miscalculations on an almost daily basis.

 

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