Treasury abandons plans for gilt market e-trading system

Plans to develop a single electronic trading system for the multibillion-pound government bond market have been scrapped.

Plans to develop a single electronic trading system for the multibillion-pound government bond market have been scrapped.

The cost of developing a central platform to amalgamate trading information and a lack of agreement among market firms were the main reasons given for not pressing ahead with the project.

The idea of a common platform for the market had the backing of member firms and was due to be in place by early next year. This would have helped reduce IT costs for firms such as Barclays Capital and Merrill Lynch International by allowing them to have just one interface with one trading information system.

It would also have helped to improve liquidity in the market and bring the UK gilt market into line with many of its European and US counterparts.

Instead, the existing system will be maintained with three firms, known as inter dealer brokers (IDBs), offering competing electronic trading platforms to market members.

Computer Weekly reported plans for a common trading system for the bond market earlier this year. Despite widespread support for the move, some users raised concerns that rival firms would struggle to agree on the specifications for a new platform.

The decision to abandon plans for an overarching system was revealed in a progress report by the Debt Management Office, an executive agency of the Treasury, following market consultation. "Pursuing the first option [a central trading system] would result either in fragmenting the market, with the possible loss of IDBs - an outcome this option was intended to avoid - and/or in unacceptably high costs, in light of the possible lifespan of the system," the report said.

However, the gilt market is moving to automate the transfer of prices electronically and ensure that they are updated more frequently.

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