3 Bond Firms Launch Online Trading Project

Three Wall Street bond giants joined forces Tuesday to create an online bond trading system that could inject efficiency into a cobwebbed business and may also force a generation of middlemen out of a job.

Goldman Sachs Group Inc., Merrill Lynch & Co. and Morgan Stanley Dean Witter & Co. said they will launch BondBook, an online marketplace bringing together buyers and sellers of corporate, junk and municipal bonds. The firms said the move could shake up the $11.7-trillion market, cutting trade costs and improving price transparency.

BondBook would bring institutional buyers directly to securities firms in a live and anonymous central exchange, theoretically leveling the playing field for small and large participants alike. Trading will begin sometime in the fourth quarter.

BondBook is only the latest group eager to try to cash in on the Internet. Market Axess, backed by Chase Manhattan Corp., Bear Stearns Cos., J.P. Morgan & Co., Deutsche Bank, UBS Warburg and ABN AMRO, will launch online trading in global credit markets next month.