Following the growth in Internet debt offerings, major ABS players have developed electronic capabilities for an online fixed income trading system.

Market Axess, a group formed by Bear, Stearns & Co., The Chase Manhattan Corp., and J.P. Morgan & Co., recently joined forces with MoneyLine Network to develop an electronic trading system for fixed income securities.

"What this is going to do is bring the companies' share of the fixed income market, about 14%, to come off the phone and put them on the computer so that they will do their trade electronically," said MoneyLine spokesman Damon Leavell.

"This is a special software that one downloads off the website and then uses like one would use Netscape or AOL. It's really much more like AOL than anything else but it's specifically for trading systems and the distribution of financial information," Leavell added.

Experts say that this move will have a positive effect on the ABS market.

"As more securities are traded over the net, it will certainly have a positive impact from the primary side in terms of liquidity because it will expand the scope and increase the absolute numbers of the investor base, " an analyst said.

It will also have a positive effect from a secondary trading perspective.

"We will see enhanced trading so to speak which could reveal itself in more spread volatility for some asset classes," he added.

Most of the Internet trading will be seen in "more traditional and less esoteric asset classes like credit card and auto," said the analyst. "These are structures that are very simple and easy to understand. They don't take a lot of due diligence on the part of the investors. If you look at a lot of the issuers in those sectors many investors already have approval to buy from most of the names."

In a related development, this week Fidelity Investments, whose platform allowed retail investors to purchase corporate debt in a recent Ford Motor Credit transaction, will be upgrading its Internet trading system to allow investors to complete loan transactions online without human intervention, bringing them one step closer to offering fixed income securities to retail investors, a spokesman said.

Fidelity currently has a online trading system that allows clients to access all the information needed to buy securities electronically, but investors still need to call a Fidelity representative to indicate their intent to purchase.

"We currently have a process where we offer our retail investors equity IPOs and debt offerings similar to the Ford offering. This week we will be bringing the equity IPO piece online so that investors will be able to the do the entire transaction online without having to speak to a representative. We expect to bring the fixed income piece online by the end of the quarter," said Fidelity spokesman James Griffin.

Griffin believes that this move is timely because "as people become wealthier and wealthier they're finding certain needs for diversification. For example, they're looking for some bond offerings because they're looking for that fixed income component of their portfolio."

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.