The move toward global, 24-hour stock and bond trading advanced one more step yesterday when the $2.2 trillion Eurobond market agreed to a computer link with the U.S. over-the-counter market, called Nasdaq.
The Association of International Bond Dealers (AIBD), representing 800 Eurobond dealers, mostly in Europe, said it plans to develop an international electronic trading system similar to the one used by Nasdaq for stock trading in this country.
Nasdaq ties together 550 U.S. securities dealers and has become the third-largest equity market after the New York and Tokyo stock exchanges.
Nasdaq will help Eurobond dealers design their system. In return, Nasdaq and AIBD have agreed that any expansion of the Eurobond market to the United States would be operated by Nasdaq.
Gordon S. Macklin, president of the NASD, said, "The more familiar the Eurobond market becomes in this country, the more possibilities there will be that Nasdaq companies will use that market" to raise money.
Eurobonds are fixed-income securities generally denominated in U.S. dollars -- but sometimes in other major currencies such as the West German mark and the Japanese yen. Issued by corporations and governments, Eurobonds form one of the world's largest capital markets, second only to the U.S. Treasury market.
The Eurobond agreement is Nasdaq's second foray into global trading this year.
In April, Nasdaq and the London Stock Exchange began swapping electronic quotations of 558 stocks of international interest. Nasdaq officials expect that, within two years, the electronic stock market link will allow traders on both sides of the Atlantic to use computers to initiate, negotiate and clear their trades.
At the moment, the Eurobond market is chiefly "an over-the-telephone market," said Stanley D. L. Ross, managing director of Deutsche Bank Capital Markets Ltd. and head of the AIBD project.
The current Eurobond system is inefficient, Ross said.
"There is enormous turnover and enormous volume, but it is not truly visible. You can't see who traded what and when," Ross said. An electronic system would create a more efficient, less costly market, he said.
"The sheer visibility of the system would mean that more people would look at it," Ross said. "If more people look at it, more people would trade on it. If more people trade on it, the volume would be higher, the spreads would get smaller. And, there's a lot more opportunity for the trader to see greater turnover."
Initially, the AIBD computer system would provide bond price quotations, data on trades, automatic confirmations and a link to the clearinghouses. However, prices still would have to be negotiated by phone. Eventually, the system could permit traders to negotiate and execute their trades by computer.
Nasdaq's design work on the Eurobond system is expected to be completed by September and will be presented to the AIBD board and membership. If approved, the system could be operating within a year in London and in Switzerland, where the AIBD has its headquarters, officials said.