UBS makes bold move with Bloomberg
UBS has sparked controversy in electronic trading by becoming Bloomberg?s sole provider of dealer-to-client execution in exchange-traded derivatives (ETDs).
Other banks, which are themselves large clients of Bloomberg?s, will be able to keep the ETDs trading pages that they have run for several years on the network. But those pages are now for the banks? own use only, as UBS is the exclusive provider of direct market access (DMA) services for ETDs on Bloomberg Tradebook.
That means that over the next few months, other banks will have to migrate clients that use Bloomberg as an execution medium for ETDs to their web-based tools. However, banks will still be able to provide order-routing services to their clients for exchanges of which UBS is not a member.
The initiative went live in March, after 18 months of negotiations, and it will take several months to assess the results, both for UBS and for Bloomberg.
It is an interesting strategy. Aside from UBS, firms including Lehman Brothers, Deutsche Bank and JPMorgan have run internet-based trading applications linking to dozens of exchanges for years, on the internet as well as on Bloomberg. The platforms competed on tiny differences in pricing and execution speeds, on sophisticated trade-legging functionality and on the number of exchanges they connect to.