Overcapacity bites bond trade platforms

The report identifies 49 US-based electronic trading systems for fixed-income securities and derivatives, versus 68 last year and 11 in 1997. It attributes the consolidation to overcapacity, contraction in the Internet economy and unsuccessful business models.

The BMA says some systems failed because they were based on business models that failed to take into account investors' desires for liquidity and market-making commitments from the dealer community.

"Start-up platforms have found it increasingly difficult to obtain continued capitalisation, and investors have become less patient with money-losing ventures," the report notes.

In Europe, the survey now identifies 24 systems that serve the Continent, up from the five systems in 2000. Some of the additions are new systems; others are the result of the Association's expanded coverage of the European markets.