BlackRock Plans Global Trading Network to Reduce Client Costs

By Sree Vidya Bhaktavatsalam

Sept. 14 (Bloomberg) -- BlackRock Inc. is building a global trading network to cut costs for clients as it wraps up the acquisition of Barclays Global Investors to become the world’s biggest money manager.

The system will enable BlackRock to buy and sell more securities for customers, reducing its reliance on Wall Street brokers, the New York-based company said in a memo to senior executives. Minder Cheng, BGI’s global chief investment officer of equity and capital markets, will lead the effort, according to the memo, portions of which were obtained by Bloomberg News.

BlackRock, co-founded 21 years ago by Chief Executive Officer Laurence Fink, will manage about $3 trillion in assets after completing the $13.5 billion purchase of Barclays Plc’s investment unit later this year. The company will continue to trade with outside brokers such as Goldman Sachs Group Inc. after the new network is operating.

“In a potentially low-return environment, if they can save a few basis points, they can enhance returns for investors,” Geoff Bobroff, an independent fund consultant in East Greenwich, Connecticut, said in an interview. “BlackRock as a firm is very technology oriented, and for them to start such a platform would make sense.”

The company’s BlackRock Solutions unit uses proprietary systems to price fixed-income securities, helping it become an adviser to institutions and governments on how to dispose of debt that has fallen in value since the onset of the global credit crisis in late 2007. BlackRock was selected in July as one of nine asset managers to buy toxic assets from banks under the U.S. government’s Public Private Investment Program.

Cost Efficiencies

Bobbie Collins, a spokeswoman for BlackRock, declined to comment on the memo, which was reported earlier by the Financial Times.

BlackRock’s trading system will “fully realize the cost efficiencies and trading opportunities across all asset classes as we become one of the largest trading operations in the world,” according to the memo.

Cheng joined San Francisco-based BGI in 1999. He oversees active and passive equities, securities lending, and cash products.

To contact the reporter on this story: Sree Vidya Bhaktavatsalam in Boston at sbhaktavatsa@bloomberg.net.