The three firms, which arrange about one-third of new bond sales, said the market, called BondBook, will start operating by the fourth quarter with trading in municipal and corporate bonds.
Investors said electronic bond trading--allowing them to trade with dealers and each other--will help compensate for dwindling dealer inventories that have made buying bonds more time-consuming and costly.
The venture "will result in improved market structure and greater market efficiency," said Tim Ferguson, head of investments and technology at mutual fund company Putnam Investments, in a statement.
Bonds' varied maturities, credit qualities and other traits have made the securities harder than stocks to mold into standard formats for online dealings. There are 4 million fixed-income securities compared with about 10,000 listed stocks.
Still, bonds are following stocks online for both individual and institutional investors. Last week, Charles Schwab, with 6.9 million accounts, said a new service will let retail investors trade bonds on the Web and gain access to new issues.
Electronic trades accounted for 6 percent of the US$13.5 trillion fixed-income market last year, as electronic-trading networks blossomed to 39 from 11 two years ago, according to the Bond Market Association. That compares with the 22 percent of Nasdaq Composite Index shares traded electronically last year.
And with the prospect of losing bond-trading customers to electronic upstarts and an effort to rein in costs, securities firms are pushing bond trading online.
Credit Suisse First Boston, for instance, has invested in Trading Edge, which started an online trading system for junk bonds last year.
Last month, Merrill Lynch, Morgan Stanley Dean Witter, Salomon Smith Barney, and Chapdelaine Electronic Brokerage announced an online municipal bond market.
Bloomberg, the parent of Bloomberg News, operates BondTrader, an electronic bond-trading service. BondBook said in an effort to "ensure the broadest global access" to its system, it will allow access through the Bloomberg service.
Goldman, Merrill and Morgan Stanley said they will back the credit BondBook will extend in its role as an intermediary. The firms also said they plan to allocate "significant trading activity to BondBook" to help it get started.
Goldman Sachs also said yesterday it was forming a US$300 million venture with Boston Consulting Group and General Atlantic Partners to invest in online businesses of established offline companies, Reuters reported.
The venture, called iFormation Group, will partner with large companies to develop and accelerate online businesses by building on strengths in those companies' existing assets, Goldman said. iFormation will also work with start-up companies and create new companies focused on collaborating with the larger, established corporations on e-commerce projects, according to Reuters.
The venture between Goldman and the consulting and investment firms will provide funding needed to build online businesses as well as financial and business development services, the partners said.
Reuters contributed to this report.
Play video
There are currently no comments for this post.