Credit Suisse Unit to Invest in Trading Edge
CS First Boston, the U.S. securities arm of Credit Suisse Group Inc. said Monday it agreed to invest in Santa Monica-based bond broker Trading Edge, in a bid to tap into its Internet bond trading service.
Trading Edge plans to expand its Internet-based trading service into emerging market debt and convertible bonds in January and municipals in the first half of next year.
CS First Boston is “very large in the various market segments that we are currently servicing and those we plan to get involved in,” said Murray Finebaum, chairman and chief executive of Trading Edge.
Credit Suisse will own a “small minority” stake in Trading Edge, Finebaum said. He declined to say how much the securities firm invested.
American depositary receipts of Credit Suisse Group fell 13 cents to close at $47.50 in over-the-counter trading.
Trading Edge has 77 employees, including Caroline Watteeuw, a former managing director of global information technology at CSFB. She joined Trading Edge as executive vice president and chief technical officer in July.
Trading Edge software allows buyers and sellers to anonymously display bid and ask prices on the system, which is accessible through a security code. When buyer and seller agree, the company acts as a broker, handling the trade and charging each side one-eighth point, or $125 per $100,000 face amount of bonds.
In addition to seeing bid and ask prices posted by others using the system, Trading Edge customers can see the prices and amounts of trades, though not the firms’ names. This is a far cry from the traditional method of trading junk bonds in which buyers and sellers phone securities firms, which act as middlemen and profit from the difference in the price they pay for bonds and that for which they sell them.
Since launching junk bond trading in April, Finebaum said, Trading Edge has drawn “close to 13,000 orders,” representing more than $14 billion in face value of securities in the $650 billion market for risky securities. Finebaum estimates that about $2.5 billion of high-yield bonds trade daily on average, even though trading has slowed in recent months.
