EuroMTS accuses banks of sabotage

EuroMTS, the largest electronic trading system for European government bonds, yesterday accused two of its bank members of attempting to sabotage its system.

Mr Gianluca Garbi, chief executive, said the organisation detected two banks bombarding the system with fake price proposals in an apparent bid to slow it down. "These banks are behaving like computer hackers," said Mr Garbi.

EuroMTS counts among its 24 member banks most of Europe's largest banks as well as the leading US investment banks Goldman Sachs, JP Morgan, Lehman Brothers, Morgan Stanley and Salomon Brothers.

EuroMTS accounts for more than 30 per cent of all trading volumes in European government bonds and is the main source of liquidity in the market. Mr Garbi said the two banks were sending millions of price inputs into the system but were not trading on their proposals. EuroMTS is capable of handling 150 price changes a second and was not going to crash, Mr Garbi insisted, but he admitted it could be slowed down. Mr Garbi said that the actions of one of the banks might be due to serious technological problems, but claimed the other was undoubtedly abusing the system to undermine EuroMTS. He said the bank in question was openly advertising a system competing with EuroMTS. EuroMTS is the only electronic trading platform that has not been developed by banks or proprietary traders. It was developed by MTS, the Italian exchange for government bonds. It allows large market-makers to trade liquid benchmark bonds electronically rather than by the more time-consuming and expensive over-the-counter method.

However, EuroMTS is fighting fierce competition in the electronic trading of bonds. Rival systems include Cantor eSpeed, a US-based company owned by Cantor Fitzgerald, the US wholesale broking firm, which is also planning to open its platform to Internet users. Cantor suffered financially last year after one of its partners allegedly violated a partnership agreement. It has been losing business to EuroMTS.

Another potential competitor is BrokerTech, an electronic trading company owned by 12 banks, many of which are also members of EuroMTS. BrokerTech is planning to start trading US treasuries and key European government bonds later this year.