What is BARX?

Bull: BARX is an electronic trading system carried on Bloomberg through which we deliver our pricing in Treasury bonds, agencies, inflation-linked paper, US dollar and yen swaps, JGBs - basically flow product - to our clients. It's a direct quote and deal system. That means you see prices on the screen and you can click and deal - buy or sell - up to the size shown. Then it takes advantage of Bloomberg's straight-through processing to book the trade.

Has BARX been a big success in Europe and the US?

It's been a huge success Europe; it's been a big success in the US and we hope it's going to be equally successful in Asia. I say it in that way because we have been doing it longer in Europe and because the European marketplace is much more accustomed to electronic trading between price providers and clients than the US. The US has been much more driven by traditional voice-based trading. So in Europe the client acceptance rate was a lot quicker than in the US. Early indications are that it should be a great success in Asia.

So it has just been launched in Asia?

We launched officially last week. But we have had a soft launch running for the past three weeks where we have had a limited number of clients trading - to make sure everything is working correctly. I am pleased to say all is going smoothly. We've seen encouraging volume. Clients like the system.

Asia has very large holdings of US Treasuries. Is that what made you decide to launch this here?

That's right. Asia holds approximately 50% of US federal debt but a lot of people are already in their beds before their trades get done. The Asian day represents less than 10% of daily trading volumes in US federal debt stock compared to US levels. It's our view that with this level of debt held in Asia, there should be high levels of liquidity during the Asia day. What we aim to offer is the same amount of liquidity to our clients here as we do in US time.

And will this make Asia a price-leader in terms of Treasury prices?

In some respects, Asia is already a price-leader, because of the tremendous weight of volume that comes out of Asia into the US marketplace. Asia already drives pricing, only it does so in US time rather than Asian time.

So what sort of liquidity are you hoping to see go through on an average day?

We are not going to be measuring it by volume traded. It's more about client usage, both from trading and viewing as well as client satisfaction. We will see the amount traded in the Asian time zone increasing, and hopefully our market share will increase. The real measure of success will be if pricing is more transparent for a client after the launch of BARX yesterday than it was the day before. We know the answer is yes, and it is our job to make sure clients take advantage of it.

What will be the advantage of trading in the Asian day rather than US hours?

It's the middle of everyone's business day. It's just the natural trading environment and far more convenient for Asian institutions.

BARX is currently second-ranked in US Treasury volumes electronically traded. So it already has critical mass?

Yes, we have massive critical mass. We are globally number two in US Treasury volumes and number one in euro and US interest rate swaps via BARX. Barclays Capital provides liquidity and this is a channel to deliver it to our clients. BARX is not a standalone strategy. It's just part of us getting closer to our clients and making the process more efficient for them.

For your Asian clients, will the most useful aspect of BARX be trading US Treasuries?

For the Asian client base as a whole, yes. For Japanese clients the transparency it will bring to the JGB market and the yen swap market is the most useful aspect. That transparency has hitherto not been there.

By contrast, in the US Treasury market, price discovery has become less of a big issue. To give you an example, when I started out 20 years ago in the futures market, you used to ring someone up and tell them half an hour later what the non-farm payroll number was. Price discovery and news discovery was what you were selling. In the US Treasury market you aren't selling price discovery anymore. You are selling ideas and how to help clients with solutions, and then backing it with liquidity to deliver on those promises.

However in JGBs and yen swaps I don't think there has been quite as much transparency in real live tradable prices. When I look at the spread of product and consistency of pricing that BARX offers I think we are providing a new service. It's a very large evolutionary step in Japan.

I would hope that this will lead to an increase in our market share. We are already seeing evidence of it increasing clients' awareness of Barclays Capital and our business in Japan.

BARX will be used in conjunction with voice-broking and will be a way of enhancing the relationship between our salesperson and the client. It's all added value. The client base in Japan is made up of city institutional investors and the regional banks and this is equally applicable to both.

I suppose you'll be able to judge how successful this is in a year's time?

We should be able to judge its success slightly sooner than that. I am very optimistic.