Wall Street banks Citigroup, Goldman Sachs, Lehman Brothers, Merrill Lynch, Morgan Stanley and UBS are banding together to launch Block Interest Discovery Service (Bids), an electronic platform for block stock trading.
The Bids system will be accessible to all qualifying broker-dealers and institutional clients and will enable participants to complete sizable block trades through continuous order matching as well as trade negotiation.
According to a statement released by the consortium, Bids resolves the classic paradox of the block trader - the need to find legitimate trading counterparties without prematurely revealing trading intentions. Information about trading intentions is only revealed when both parties present a legitimate opportunity to trade with each other. Furthermore, orders and executions remain anonymous and the identity of one counterparty is never revealed to the other counterparty.
The bids platform has been developed by Alberta Market Solutions, which specialises in capital markets infrastructure, market design and technology. The vendor will provide ongoing support for the system.
Paul Hanson, a director at Alberta Market Solutions, says discussions with senior traders at different buy-side firms have been consistent – they look forward to the sell-side taking the lead to create a new low-cost industry utility that integrates disparate liquidity.
"They believe this platform will provide a level playing field for market participants," he says.
The new company is currently searching for a chief executive and, subject to regulatory approval, expects to start trading in early 2007.
Earlier this week Citigroup, Lehman Brothers and Merrill Lynch teamed with Credit Suisse and Fidelity Brokerage Company, to launch an alternative order-matching engine called LeveL.