Liberty And Garban Discuss Newco II With Quotron

Garban Ltd. and Liberty Brokerage Inc. have agreed to create a consolidated fixed-income data feed that will be sold to third- party data vendors, according to documents obtained by IMD. The two interdealer brokers collectively solicited Quotron Systems Inc. to become facilities manager of the product.

The feed was proposed in a letter to Quotron from Garvin Information Systems Inc., Garban's information affiliate. The letter specifies a "Treasury Securities Market feed" that would deliver last sale, volume, and hit or take indicators for all transactions executed by Liberty and Garban. According to the documents, Liberty and Garban collectively hold 45% of the government bond market. The feed would be available for distribution beyond the primary dealer community.

It isn't clear whether the Garban/Liberty axis has approached other vendors about the facilities manager role. Neither Liberty nor Quotron would comment on the negotiations.

"There is nothing in place between Garban and Liberty," says Timothy Anderson, president of Garvin Information. "If there were a deal in place I assume I would know about it." Anderson offered no comment when asked if Garban and Liberty were discussing a consolidated feed.

In response to the Garban/Liberty overtures, Quotron drafted a broad business plan for creating a family of data services based on the Garban/Liberty information. According to the draft plan, Quotron hopes to develop both page- and record-based digital feeds from the data supplied by Garban/Liberty. The feeds would initially focus on U.S. government securities prices and would later expand to include mortgage-backed securities, corporate and Eurobond information.

Inside prices from Garban and Liberty would bolster Quotron's hope chest of fixed income resources. Quotron has already acquired exclusive rights to market and distribute CHATS, the automated trading system for Treasury securities developed by Chapdelaine. (Trading Systems Technology, Oct. 23, 1989).

Quotron's planning documents also indicate that a third broker may be brought in to augment the prices supplied by Garban and Liberty. Quotron has exclusive rights to CHATS prices, making Chapdelaine a possible candidate as the third broker.

But the Garban/Liberty team was rankled by the recent disclosure that competitor Chapdelaine had established a partnership with Quotron, sources say. The feasibility of a Garban/Liberty/Chapdelaine data cooperative remains questionable.

In its draft business proposal to Garban/Liberty, Quotron suggests that a venture company should be formed. The company would be 85% owned by Garban and Liberty with Quotron owning the remaining 15%. The proposed term of the relationship between the data giant and Garban/Liberty is ten years. The Quotron planning document projects data feed product rollout for the second quarter 1990.

Garvin Information Systems, along with Garban and money market broker Garvin Guy Butler Corp. are owned by MAI PLC.

According to the draft plan, Garban and Liberty would deliver last-sale price information from New York, London and Tokyo to Quotron. The primary responsibility of Garban and Liberty would be to maintain the integrity of the delivered data. The company to be formed by the three principals would have a staff to administer the system and participate in sales and support.

Quotron would consolidate the Garban/Liberty information and create three feed products for sale to information vendors. Competitors of Garban and Liberty would not be permitted to purchase the feeds. Three consolidated feeds would be released: the first (at a cost of $50-$70 per screen per month) would be a digital feed of last-sale price, time, volume and hit or take indicators for all active U.S. government issues.

The second ($70-$100) would be a digital feed for use in video price page display environments or in analytics programs. Feed two would contain everything in the first feed, plus off-the- runs.

The third proposed feed ($200-$250) would include the second, plus bids and offers. Yield information may also be included. For all three products, the specific source (i.e. Garban or Liberty) of the data will not be listed.

The joint venture planning document projects revenues of $300 million in 1994. The company's projections also claim a minimum customer base of 125,000 terminals for all three products by 1992. According to the document, these estimates were formulated on Dec. 6, 1989, when all three parties met to discuss the project.

Garban's courtship of Quotron for fixed-income services development places Garban's parent company, MAI, in a peculiar position. U.K.-based MAI is also sponsoring RADAR, a foreign exchange order matching system being developed by RADAR Financial L.P. (Trading Systems Technology, Jan. 15). RADAR will compete with Quotron's yet-to-be-released FX Trader service. "[RADAR] is absolutely 100% completely removed from Garban," says MAI-Garvin Information's Anderson.

Liberty Brokerage is also involved in some odd couplings. After Liberty filed papers in November 1989 with the Federal Reserve to acquire Market Vision Corp., RMJ Securities Inc. broke-off all relations with Market Vision. RMJ had supplied its government securities prices to Market Vision.

RMJ isn't too pleased with Market Vision's new outlook. "We gave [Market Vision] the digital feed to distribute only to our customers, which are primary and aspiring primary dealers," says Richard Jackson, RMJ's president. He says the Liberty acquisition will "violate our agreement with Market Vision," and that "we'll probably be in litigation with Market Vision."

No one at Market Vision last week could say where they were now getting their fixed-income prices, though one salesman said: "Liberty, I think." All questions were deferred to James Shapiro, company president, who could not be reached.

The Liberty acquisition has yet to be approved by the Fed. If the deal goes through, it would make Market Vision a distant cousin to Quotron-parent Citibank N.A., from whomMarket Vision already gets foreign exchange data (MTR, Aug. 7, 1989). Citicorp also owns a piece of Liberty.