MTS strengthens bond network

While BrokerTec gets its derivatives business off the ground in the United States, a similar network in Europe, Italy-based MTS, continues not only to grow but proliferate. The company has opened new offices, launched new products, signed new partners, will announce a central counterparty for all

In July, the company announced that four new market makers Merrill Lynch, Morgan Stanley, Schroder Salomon Smith Barney, and Credit Suisse - had joined the soon-to-launch, Internet-based, dealer-to-customer BondVision platform, bringing the total number of participants to 24. The announcement came just after news that Japan's 10 largest bond dealers had agreed to join the company's platform there, MMS Japan.

What began as Italy's fixed income dealer system has captured between 30% and 50% of Europe's OTC fixedincome cash and repo business since converting to a for-profit enterprise in 1998 and setting up local trading platforms in France, Germany, Belgium, Holland, Spain, Portugal, Finland and London. The London office, called EuroMTS, offers trading in both government and non-government bonds issued by companies and governments in countries where MMS hasn't yet set up a local operation, such as Greece and, of course, the United States.

Going head-to-head with better financed but monolithic competitors like BrokerTec and eSpeed, MTS has grown organically by providing centralized execution and cross-border access to all its markets through its Rome headquarters while encouraging local operations to build products designed for local conditions. The company also has been careful to allow only banks with active bond operations in multiple European companies to take equity stakes in its operations.

"We wanted truly pan-European participants and not just big companies," says Gianluca Garbi, the 31-yearold chief executive.

So far, AM remains a wholesale secondary market, and Garbi says it will remain so for some time. Speaking at a company meeting in Portugal, he said MTS's systems could handle derivatives, which fit its strategies, but that they would have to have a low correlation with existing products to fly.

By Steve Zwick