In an attempt to find a better way of taking its product online, six of Wall Street's leading securities firms have launched SyndicateHub, a multi-dealer Internet hub for institutional investors.
Goldman Sachs (NYSE:GS), J.P. Morgan Chase (NYSE:JPM), Lehman Brothers (NYSE:LEH), Merrill Lynch (NYSE:MER), Morgan Stanley Dean Witter (NYSE:MWD Salomon Smith Barney (NYSE:C), all participated in the undisclosed round of funding, which includes hiring an ASP, Communicator Inc., to build out the trading platform and service provision for SyndicateHub.
"New debt issuers have been seeking a centralized and efficient venue to reach the broadest range of institutional customers," says Victor Simone, managing director of fixed income ecommerce at Goldman Sachs. "SyndicateHub is designed exactly to meet their needs as well as those of the dealers and the end-users."
Also, what investors are seeking is "simplified access to a vast amount of market information," said John Casaudoumecq, head of fixed income e-commerce at Salomon Smith Barney, in a statement.
SyndicateHub says it's tapping a huge fixed income market that operates fairly efficiently, but without a centralized location. And, it says, the hub does what other bond sites, including BondBook, MarketAccess, and TradeWeb fail to do -- it doesn't just provide an electronic trading platform, it provides a connection to alternative firms/sellers to choose from.
"Fannie Mae is selling $5 to $6 billion worth of new issues right now. Now an institutional investor can go and see what's coming to market right away," said Staunton Peck, president of Securities Hub.
Nonetheless, while the six firms have each placed capital in SyndicateHub, they each plan to compete with one another by offering new issue bond offerings, among other items.
Peck says the fragmented bond market deserves a centralized location where market updates, summaries of recent pricings and other new issue information are readily available through the ASP's search engine.
In the past, bond managers and buyers have negotiated sales over the telephone or have made decisions influenced by what Peck says are "spotty information channels."
"The buy side gets the joke, they can gain more investors by joining a virtual shopping mall where investor traffic will be brought to their front door over our platform," says Peck.
Peck confirms what other offline businesses have said in the last several years: The Internet offers a way for similar businesses, ranging from plastics to pharmaceuticals, to pull together in a centralized location to offer competitive products and services.
The Syndicate Hub platform currently links dealers to over 8,000 institutional fixed income investors and money managers -- a significant increase since the hub's debut in December 1999, with 900 investors.
In return for paying an undisclosed yearly fee to Syndication Hub, the portal guides readers through its search engine to co-mingled research, market commentary, and pricing information from more than 500 analysts and traders at the six participating firms.
Peck says that for now buyers can access market information for free from any of the six firms. He declined to say how much the firms pay for the ASP's services, but said they did not pay according to how many customers were shoot to them or per transaction.
Syndicate Hub uses single sign-on and authentication software when granting a user access the participating firms. Firms do not have access to competing company information, which includes new issues.
In the future, Peck says Syndicate Hub will turn its attention to hooking up other fragmented offline industries, like plastics or pharmaceuticals. Not only would customers save money through the efficiency of the Internet, Peck contends users would enjoy the convenience of having customers shoot to them over his hub.
The company currently has 30 employees and expects to relocate to White Plains, NY in the next few months when it increases its staff to 50.