Claiming to be the first online bond interchange, Intervest launched today to let investors anonymously buy or sell corporate, municipal, or government bonds online under the watchful eye of the Securities and Exchange Commission.
Intervest is a subscriber-based service that allows qualified investors to buy fixed securities using one of Bloomberg's 60,000 installed terminals. The company says protecting subscribers' identities helps investors get fair quotes that don't fluctuate based on the size of the firm or purchase.
Intervest is entering a market newly created by the success of online real-time stock quotes and trading posts such as Reuters's Instinet. Such services are driven by investors who need instant information.
Mutual funds, money managers, insurance companies, pension finds, brokers, or dealers can buy or sell bonds to and from other Intervest subscribers anonymously using the service. An automated feature also shops subscribers' offerings for potential buyers and alerts sellers when a buyer is interested in their portfolio.
Prior to releasing its new service through Bloomberg, InterVest was already hosting a small electronic trade system for its clients.
Larry Fondren, president of Intervest, said his service doesn't eliminate traditional bond trading tactics but said there are times when investors know what they want to buy or sell and are looking for the most efficient and economical way to execute a trade.
"Bonds have been a buy-and-hold product for a long time," he said. "More recently, firms are learning that a liquid investment strategy is a better mechanism."
Subscribers to Intervest don't pay to sign up and instead pay per transaction. Once a company is qualified, it can log on to a Bloomberg terminal and access a series of screens that show government, corporate, or municipal bond listings in the order of maturity.
When subscribers want to buy or sell, they go to an execution screen where they can see, among other things, the high and low bid on a bond. Subscribers can then negotiate and transmit buying and selling interests. After transactions are made, they are reported to Intervest's clearing agent that acts as principal in all transactions between buyers and sellers.
Subscribers pay a fee for such transactions ranging from half a cent to 50 cents per bond. Currently there are only 100 subscribers, but Fondren said 700 potential subscribers are considering the service.
He said there are approximately 15,000 firms for Intervest to tap. Signing on as many of these as possible is what Intervest needs if it is going to compete with the traditional market, in which larger firms get the most activity by offering one-stop shopping and versatility for investors.
Youssef Squali, a technology analyst for Laidlaw & Company, said real-time stock quote sites as well as services like Intervest will continue to pop up on the Net as investments in such markets continue to grow.
"I think that right now the Net is growing so fast, you will continue to see a need for these types of services. For years, people have been investing blindly," he said.
David Locke, a research analyst for investment banking firm Volpe, Welty & Company, agreed that despite the subscriber base, the service is worthwhile.
"The more information [and] the faster you can get it, the better. It makes for more efficient markets," he said. "What these guys are able to do is tell you when someone is interested in your product. It's conceivable that this and all services like E*Trade have the potential to eat into the revenues and profit margin of the existing infrastructure."
Because transactions can only be made online using Intervest, the company is using Bloomberg's technology as well as security systems tested by other e-commerce companies and tailored to Intervest needs, Fondren said.