John Thain's vision of NYSE Group as a global trading supermarket got one step closer to reality Friday.
The Big Board said it got approval from the Securities and Exchange Commission to begin its bond trading operations. NYSE Bond, which is actually the second attempt by the exchange to get into the business, will begin its rollout April 23. It will allow trading in 6,000 debt securities, mostly corporate debt of issuers already listed as equities on the exchange, such as bonds of Ford Motor (nyse: F - news - people ) and AT&T (nyse: T - news - people ).
Corporate bond trading right now is done mostly between brokerage firms, in a $12 billion a day market. NYSE (nyse: NYX - news - people ) hopes to take a chunk of that by sharply lowering the trading costs for retail investors on its electronic system.
Thain has been remaking the NYSE amid a massive market consolidation and competitive pressures from abroad. He is close to completing his purchase of Europe's electronic Euronext, which will add equities and options overseas as well as futures through Euronext's Liffe exchange in London.
He already transformed the floor-based exchange in New York through last year's purchase of Archipelago Holdings and the subsequent move to more automated trading alongside the human specialists.
Thain has talked about creating a market where a company can trade its whole balance sheet, debt, options, equities and ultimately futures contracts. Listed companies "want one-stop shopping," says John Holman, vice president of fixed income at NYSE who has spent the last two years putting together the new program.
Wall Street firms have already been watching fees from bond trading shrink since regulators changed the rules five years ago and began requiring that trade information, such as prices, be posted for investors and others to see. Holman says he is not worried that NYSE is competing with its own member firms for the corporate bond business, since most of them are looking for additional trading volume anyway.
NYSE Bonds will be automated, matching orders by price and time and reporting quotations and trade prices in real time. NYSE has lined up a dozen firms that have agreed to trade in the system to provide liquidity.
"We look forward to introducing this advanced system with a dramatically increased inventory of issues and industry leading functionality to better serve the bond trading community and their customers," says Holman.
NYSE Bond will replace the Automated Bond System, which allowed trading in 1,000 debt securities but which has seen shrinking volume in the last few years. There was a $15,000 annual subscription fee for ABS, and the exchange collected usage fees between 5 cents and 30 cents depending on the volume of orders entered.
The subscription fee and other fixed costs will be dropped for NYSE Bond, leaving a transaction fee of 10 cents per $1,000 face value traded.
The exchange began its life trading bonds alongside of stocks, peaking at a volume of $12.7 billion in bonds in 1992 before the business began to slip away. But its plans to return to the glory days are already evident on its Web site.
"NYSE operates the largest centralized bond market of any U.S. exchange or other self-regulatory organization," the exchange points out on its Web site. "It offers investors a broad selection of bonds: corporate (including convertibles), agency and government bonds."
Most of NYSE's bond volume is in corporate debt, with some 94% in straight, or non-convertible bonds, and 6% in convertible debt issues, the Web site says.
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