There are probably a lot of people out there praying this doesn’t work out.But knowing BlackRock, the biggest asset management firm in the world, led by the legendary Larry Fink, it likely will.
The firm is planning to launch a trading platform later this year that would allow it to trade bonds with its peers without the aid of Wall Street, says the Wall Street Journal. That means way less cash for anyone that deals with BlackRocks $3.5 trillion of assets. Moreover, BlackRock plans on charging a fee substantially lower than the going rate.
This is epic. It could completely cut dealers out of a lot of action. And the question is, if BlackRock can do it, who else can?
Here’s how it would work (from the WSJ):
The trading platform would be run by the New York-based company’s BlackRock Solutions arm and offer 46 clients—including sovereign-wealth funds, insurance companies and other money managers—the ability to trade in corporate bonds, mortgage securities and other assets, company executives say.
Under the plan, the platform would seek to match buyers and sellers of the same securities, in a process known as “crossing trades.”
Fink has always said that Wall Street’s large spreads are out of control, and BlackRock execs are saying that this isn’t going to “cannibalise Wall Street.” “If there’s a savings available to clients, we want to give it to them,” said Richard Prager, a BlackRock managing director.
Try telling that to the Wall Street dealers. …