Garban-Intercapital is to extend its e-commerce strategy to OTC interest rate derivatives with the launch of a new Internet-based trading platform called Swapcross. The group has also taken an equity stake in capital markets ASP firm MoneyLine.
The new e-commerce initatives were unveiled as the company reported a doubling of profits for the six months to end-September to £30.3 million from £15.3 million for the comparative period.
The Swapcross project is an electronic platform that gives traders the ability to post interest rate swap orders anonymously over the Internet without revealing size or direction. Orders will be matched daily at the Isda mid-market benchmark fixing rate for swaps. Product coverage will start with the euro followed by sterling, Japanese yen, US dollars and Swiss francs.
"The initial response from our customers has been extremely encouraging and Swapcross is expected to go live in January 2001," the company reports.
Garban re-affirmed its faith in e-commerce with an investment of $13.5 million for 7.6% of the equity of MoneyLine, an application service provider specialising in the development of transaction systems, e-commerce platform hosting and real-time price and information delivery.
"Financial services companies are experiencing a transformation in the way they trade and are creating a whole range of e-commerce systems to address these requirements," Garban explains in a statement. "Many are outsourcing the development of these trading systems to Application Service Providers with specialist knowledge. MoneyLine overlaps our customer base and provides a service that is adjacent to our own expertise."
Garban's investment is being made alongside Bank of America, Global Crossing and Accel Partners as a part of a $36 million second round of financing. MoneyLine had net assets of $2.2m and reported losses of $6.3m in 1999
Garban describes the transition of its traditional voice broking businesses to the Electronic Trading Community platform - an automated fixed income trading system launched in February 2000 - as "very encouraging". Pure electronic trading volumes in US Treasuries exceeded $100 billion for the first time in November, Garban reports. By end September, however, ETC losses stood at £3.1 million.
"As markets migrate to electronic trading we believe that our customers will want perhaps two or three competitive electronic systems in each sector to prevent a monopoly outcome," states Garban. "Competition to achieve critical mass by new electronic systems is growing, including those run by bank owned consortia, but none are able to offer the range of products and immediate liquidity that Garban-Intercapital is capable of delivering."
Garban says it will expand the platform coverage during the first quarter 2001 to cover six additional products - Japanese government bonds, US agencies, eurobonds, Australian government bonds, US municipal bonds and US repo.