The world is becoming intimately acquainted with the technical ins-and-outs of the Bloomberg LP empire.
There is Bloomberg’s bread-and-butter business of selling sophisticated data terminals to thousands of banking, hedge fund and regulatory authorities around the world. There is also the well-respected news wire run by Matt Winkler.
Sometimes the two were intertwined in a not-so-great way. Banks including Goldman Sachs and JPMorgan voiced concerns that Bloomberg News reporters had tapped into proprietary terminal-based data to spy on their employees.
Which is why we have been talking about Bloomberg’s UUID functions, Message Mining, engine parsing and the like.
But how many people have heard of Bloomberg’s broker-dealer?
Meet Bloomberg TradeBook — your one-stop shop for live electronic, and alternative, trade execution. (Bloomberg, of course, has other ambitions beyond its existing agency broker-dealer. Those include becoming a designated Swap Execution Facility, or SEF, able to execute derivatives trades under the new regulatory regime).
Perhaps unsurprisingly, there has been some grumbling from banks about TradeBook in the wake of the Bloomberg data scandal. You see, traditional broker-dealers have long harboured the suspicion that TradeBook is out to disintermediate the banks.
Cue payback time.
From the New York Post on Tuesday:
Of particular concern is whether data being mined by Bloomberg to create products and services that compete directly with Goldman. One such discussed product is Bloomberg’s “Tradebook,” a profitable broker-dealer created in the late 1990s to help create additional revenues for the company.
Goldman is trying to determine if Bloomberg has used the bank’s data to help drive business at Tradebook.
Even if Goldman doesn’t kick off its own Bloomberg-like services, it will look to be more “aggressive” in placing limits on how Bloomberg uses its data.
We have no doubt that these concerns are real, but the idea of taking on Bloomberg’s terminal empire? Eh, not so much.
Part of the attraction of Bloomberg is its ability to aggregate quotes from a wide variety of financial companies. Try getting a large investment bank to spearhead an industry-wide data effort and it tends to fall apart rather quickly. Witness, for instance, the (so far largely experimental) attempts to put together electronic corporate bond trading platforms. Almost every bank has their own one going, but none has yet to really team up with another to pool their liquidity.
That isn’t to say that industry-wide efforts can’t happen — Isda, Markit and TradeWeb being prime examples of this — just that successful long-term aggregation-based projects are pretty rare and usually of an extremely self-interested nature.
Back to those concerns, though. As Lisa points out, financial data companies like CMA, Markit and Bloomberg all have market quotes passing through their systems. The data doesn’t really belong to them per se, but they receive it and digest it and send it back out through some sort of nice-looking user interface, and everyone is relatively happy. If big banks like Goldman suddenly decide that they’re not happy providing that data, then Bloomberg has a genuine problem.
On a more intellectual level, there is also a lingering question about the appropriateness of Bloomberg’s current World Domination business model. Goldman may operate its own dark pool, and administer large database projects of its own, but it does not run a news service.
Bloomberg, increasingly uncomfortably, does all three.