Interdealer Brokers Would Offer Ticker Of Treasury Prices If Government Mandates Wider Access To Screen Info

Several interdealer brokers in the U.S. government securities market have conditionally agreed to create a consolidated ticker of Treasury prices that would be made available to all quote vendors. Whether the plan can or will go forward hinges on the outcome of two government inquiries into the brokers' practices.

None of the parties involved will comment for the record, but sources say that three of the chief interdealer brokers have informally consented to the plan, with a fourth straddling the fence. The three are said to be RMJ Securities Corp., Garban Ltd., and Chapdelaine & Co. Government Securities Inc. The fourth, Fundamental Brokers, hasn't made up its mind pending consummation of its planned sale to Quadrex Holdings, Inc.

Sources say the proposed ticker would be managed by a jointly-owned company with the working name of "Newco." It would consolidate and disseminate last-sale prices -- and possibly bid/ask quotes -- from the brokers' existing screen networks. The brokers would refrain from installing their own screens in the retail market, giving Newco an exclusive franchise there.

The new company wouldn't build its own network. Instead, it would operate more like a conventional exchange, providing its Treasury data feed to quote vendors for redistribution. Each terminal carrying the prices would be assessed an "exchange" fee.

Cantor Fitzgerald Securities Corp. appears to be barred from contributing to Newco because of its exclusive agreement with Telerate, Inc., which prohibits Cantor from giving quotes to another vendor and Telerate from carrying another broker's prices. Cantor is the only interdealer broker that sends quotes to the retail market.

However, all of this will be moot, sources say, unless the current government inquiries result in pressure on the brokers to broaden access to their prices and services, which are now provided only to primary and other reporting dealers. One inquiry is being conducted by Congress's General Accounting Office, which is due to release its report shortly. The other -- more open-ended -- is a Justice Dept. antitrust investigation.

Either could bring Newco into being. The long-overdue GAO report -- which has now attained the status of "vaporware" -- could prod Congress into mandating greater access to broker screen prices. Or the ticker could be required as part of a consent agreement -- "we didn't do anything wrong and we won't do it again" -- to settle the Justice antitrust investigation.

Two questions are at issue in both. First, should the brokers make their quotes and other price information available beyond the inner circle of primary dealers? Second, and more important, should the brokers make their blind brokerage services available beyond the inner circle?

The Newco plan hints that the brokers are prepared to lose the battle if they can win the war. They'll be statesmen and distribute their prices to the retail market if they can retain control over who they do business with.

Sources say the brokers would move forward only if the proposed company obtained Federal status similar to that of a securities exchange or NASD, which have certain antitrust exemptions. While the brokers' current practices have attracted the interest of antitrust investigators, it's nothing like the heat they would feel if they formed a joint company. This fact is largely responsible for the reluctance of sources to speak on the record.

Many primary dealers oppose widespread dissemination of "inside market" prices. As a result, individual brokers have been afraid to follow Cantor into the retail market for fear of a customer boycott. By banding together, they would make it difficult for dealers to single out a broker and put it "in the box" by refusing to do business with it.

Broader access to broker prices would be good news for Reuters, which needs more than its current assortment of dealer quotes to provide a good feel for the market. In anticipation of the broker ticker, Reuters has left a window for it on the screen of the U.S. government securities version of its Reuter Dealer Trading System terminal (MTR, September 1987). Telerate stands to lose if the consolidated feed becomes a reality, unless it can alter the terms of its deal with Cantor.

One peculiar result of the proposed ticker would be the instant conversion of what is perhaps the highest-value information in the capital markets into a come one-come all commodity. Vendors like Knight-Ridder, which has assiduously pursued contributor relationships with primary dealers, would find their efforts gone to waste, since the lowest of the low-end quote services would have access to the inside market on an equal footing. Too much equality isn't a good thing, grumble some vendors.