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April 1, 2011

Tradebook Reaches Out to Brokers

By James Ramage

Bloomberg Tradebook is courting the sellside. After almost a year at the helm, Ray Tierney, president and chief executive of Bloomberg Tradebook, has transformed the former agency broker by branching out and offering its products and services to brokerages. It's also moving beyond its execution-only model for its buyside customers, he added.

Ray Tierney

"To compete in an uncertain environment, due to regulatory or technological challenges, Tradebook had to evolve," Tierney said. "Historically, we were a product-focused organization, specific to Tradebook. Now we are going to a client-focused organization-moving from service to support to being relationship-driven and partners in helping grow clients' business."

For the sellside, this boils down to several things. Bloomberg wants to provide smaller broker-dealers with advanced execution abilities they need to solicit business. With multi-asset-class execution capabilities, Bloomberg can help these firms develop an "all-encompassing trading solution," Tierney said. This includes providing low-latency market access, algos with cross-asset pairs strategies and global portfolio trading capabilities.

"They need something on the edge that differentiates them, in terms of their execution performance," he added. "We can provide that and help them deal with the complexities in today's marketplace."

For the buyside, Bloomberg will still provide liquidity in agency fashion. But it will also use technology to enhance its position and relationship with clients, Tierney said. This entails providing algos, market insight and analytics. It is also enhancing its execution consulting to help clients make sense of the data, analytics and technology they receive and use.

Bloomberg is also leveraging more than 100 research and development resources dedicated to Tradebook. Within that group, it has carved out a smaller set to work on initiatives that help solve client issues regarding risk management capabilities or customization-tailoring risk management tools and algorithms.

"We're investing in the business around data technology and analytics to help [clients] drive down their implicit costs of trading," Tierney said.

Bloomberg is also building alpha-generating research content. But the firm will reveal details about that at a later date, Tierney said.

Bloomberg Tradebook's moves put it in good company on two fronts. As commissions have fallen over the past year, agency shops from ConvergEx to ITG have been looking to increase revenues by finding new products and services through which to reach customers. These firms have noticed how some buyside shops have even stopped trading with execution-only brokerage houses and are looking for other ways to get paid.

Bloomberg also joins firms such as Morgan Stanley, UBS and Instinet, which have ramped up their broker-to-broker businesses. They've seen demand rise from broker-dealers lacking the financial wherewithal for sophisticated algorithms, direct market access, analytics and connectivity to dark pools.

And Tierney's background made him a worthy candidate to captain such an expansion at Bloomberg Tradebook. He joined the firm early last April after spending 16 years at Morgan Stanley. For the first 12 years, he ran cash sales trading on the brokerage side. He spent the last four years as the head of trading for the investment manager.

"During that time," he said, "I developed a lot of relationships that span both sides."


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