Markit Sees Steady Growth in Bloomberg Chat Alternative

Morgan Stanley has confirmed this week that it is an official contributing partner of Markit's Open Federated Chat initiative - a new open messaging network that will allow financial professionals to communicate and share information across any communication platform - while several other banks and technology providers are in advanced talks with the vendor, Inside Market Data has learned.

In the first quarter of this year, Thomson Reuters, Goldman Sachs and Deutsche Bank all emerged as early partners of the project, which could potentially displace Bloomberg's Instant Bloomberg messaging network, an exclusive component of the vendor's Professional terminal that is currently used by 315,000 financial and business professionals.

"[Morgan Stanley is] a contributing member and partner to the Open Federated Chat," a spokesperson confirms, meaning the bank will contribute its entire contact directory to Markit's centralized directory, pay an enterprise fee rumored to be around several hundred thousand dollars to enable its staff to connect to the network, and sponsor its own buy-side clients to become federated members, as Markit intends to deliver the service to the buy side for free.

Meanwhile, a document from Thomson Reuters detailing how users of its Thomson Reuters Eikon Messenger tool will be able to communicate with anyone connected to Markit's open chat system indicates that JP Morgan, Credit Suisse and Citigroup all signed up to be sell-side partners in the second quarter of this year. All three firms declined to comment, but several sources at Credit Suisse suggest the bank is at least in advanced discussions with Markit to become a partner.

The document also shows that Bank of America will join Morgan Stanley by signing up this quarter, though a spokesperson could not be reached for comment by press time. Barclays and UBS are expected to join in the fourth quarter, and although both banks declined to comment, sources at UBS confirm the bank is "very interested" in the initiative.

In addition to these sell-side partners, the documentation suggests that technology vendors including UK-based trading technology and market data vendor Fidessa and New York-based US and European fixed income marketplace operator MarketAxess will join Open Federated Chat in 2014. While MarketAxess was unable to specify the nature of its involvement, a spokesperson for Fidessa says the initiative has "been on the cards  for a while," but declines to comment further.

The Thomson Reuters documentation indicates that Markit will release a software development kit for partners later this quarter, which will detail how buy-side firms using Bloomberg will be able to connect to the network, before fully implementing Open Federated Chat towards the end of the year.

For example, Instant Bloomberg users will not be able to connect to the network using their Bloomberg email addresses, which means there will be a requirement for buy-side firms to have a secondary messaging platform such as AOL Instant Messenger (AIM) and Microsoft Lync, but according to one market data manager at a global investment management company, many firms will already have this in place.

"My understanding is that you would have to have some other chat platform, but most places have at least one other chat platform that is permissible for internal or external communication, which Markit can plug into," he says.

Displacement Projects

Although Markit declines to comment on Open Federated Chat, Jonathan Watson, director at London-based consulting firm Expand Research, a subsidiary of the Boston Consulting Group, says positive momentum is building behind the initiative. "If the current momentum of buy-side and sell-side institutions participating in Markit's offering continues, this becomes a viable and compelling proposition...and could significantly shake-up the current market data landscape," Watson adds.

In fact, a number of sell-side firms who predominantly use Bloomberg Professional to speak to clients are "almost relying" on the Markit's Open Federated Chat to be a success, one industry source says, as it would allow them to displace a significant number of the $1,750 per month terminals.

"Pragmatically, I don't see the buy side usage of Bloomberg halting, but given the cost pressures I expect to see the sell side start to question the necessity of a Bloomberg terminal on every desk," he adds.

Bloomberg declines to comment.