Automated Bond System (ABS)

What Was the Automated Bond System (ABS)?

The Automated Bond System (ABS) was an early electronic bond-trading platform the New York Stock Exchange (NYSE) utilized from 1977 to 2007. The system was utilized to record bids and offers for idly traded bonds until they were canceled or executed on the exchange.

The ABS was supplanted in 2007 by the NYSE Bond system.

Figuring out the Automated Bond System (ABS)

The Automated Bond System was an early electronic platform that recorded bids and offers for idly traded corporate, agency, Treasury, and municipal debt securities on the New York Stock Exchange. The electronic system worked with the trade of such bonds, especially corporate bonds.

Inert bonds are debt securities with moderately low trading volumes. Such bonds may not sell for quite a long time, or even weeks, at a time. Since their trading volume is so low, they are frequently illiquid and have unpredictable prices. That is on the grounds that when dormant bonds are bought or sold in a huge quantity, their price is generally impacted. Dormant securities are likewise in some cases called cabinet securities in light of the fact that they were once kept in a cupboard on the trading floor and possibly eliminated when they were required.

Since the bid and ask prices of latently traded bonds aren't continually changing due to demand and supply conditions, investors searching for a quote might experience issues finding a transparent solution. By having all latent bonds electronically checked, the NYSE had the option to keep a decent inventory of bond prices, just in case an investor was keen on purchasing them.

The ABS allowed for the trading of 1,000 debt securities. The annual subscription fee for the ABS costs $15,000. The NYSE additionally collected use fees on bond trades, going from 5 pennies to 30 pennies, contingent upon trade volume.

History of the Automated Bond System

The Automated Bond System came full circle in 1977. At its send off, the NYSE noticed that "trading in corporate bonds has generally been a drawn-out, tedious and for the most part manual operation that elaborate nine distinct advances and extended look through bureau documents for conceivable matches on bonds, prices, and amounts."

The ABS was an early automated trading system that simplified this complex cycle. It was at one point the biggest bond market of any U.S. exchange. In 1992, it crested at a volume of $12.7 billion. In subsequent years, however, volume started to drop off, to around $1 billion annually in the system's last years.

In April 2007, the NYSE sent off another online platform for trading U.S. corporate debt securities, called NYSE Bond. The new system made it simpler for small investors to take part in the bond exchange. At its send off, NYSE Bond had no annual subscription fee and charged a transaction fee of 10 pennies for every $1,000 in face value traded.

Features

• The system was developed by the NYSE to work with liquidity and transparency for bonds with in any case low volume and trading activity.
• The automated bond system was an electronic bond quote and execution platform that was in operation from 1977 to 2007.
• Volume on the system topped in 1992, however the system was at last phased out and supplanted by the NYSE Bond platform as more up to date advancements entered the bond markets.