[ by Howard Haykin ]

Bloomberg L.P.'s most widely used program, its chat messaging network, may soon have competition.  Nine Wall Street firms are working together on an alternative network.  It's Interesting to note that work began on this alternative network even before it was disclosed that Bloomberg journalists were accessing sensitive customer information. 

The chat program has always been a main selling point for Bloomberg's $20,000-a-year terminals.  But at that price, banks would prefer to lessen their reliance on the terminals, and thereby lower their payments to Bloomberg.  Two competitors to Bloomberg – Thomson Reuters and Markit – have already signed an agreement to develop the technology, according to people involved in the deal who requested anonymity because the negotiations were not complete.

As it has been discussed, Reuters and Markit would work in cooperation with banks - including Barclays, Citigroup, and JPMorgan Chase.  Deutsche Bank and Goldman Sachs have been even more involved, agreeing to use the service when it is introduced.  The program would allow bank employees to talk to business partners at other firms in the way that they do now on the closed Bloomberg network.  Such chat systems are vital to everyday work on Wall Street, like communicating with competitors and clients to work out prices for trades.

One banker involved in the conversation went so far as to minimize the need for the Bloomberg terminal, if an alternative chat program existed:  “The chat application within the Bloomberg terminal has become a very powerful tool. If that didn’t exist, we’d have a substantially lower need for terminals than we do.”

Other Messaging Services in the Market.    It would be incorrect to say that other messaging services do not exist.  There already are countless other messaging services - but none can compete with Bloomberg, which has been around for years and is considered essential.  That's because Wall Street banks and their customers are all on it.  And access to Bloomberg is available only to people who have a terminal.

The new chat program will be available to anyone in the financial services industry, people involved in the deal said. It would build on Reuters’ chat program, but add users from Deutsche Bank, Goldman and Markit, a data firm owned by many Wall Street banks.  Reuters, like Bloomberg, controls about a third of the data terminal business, but its services are available in a more piecemeal fashion.

Success of any new messaging service hinges on ...  how well it attracts the biggest customers of the banks - asset managers like BlackRock and Fidelity.  Some asset managers are said to have been involved in the talks so far, but not at the same level as the banks. Security of any new system will also be a necessity for communicating sensitive trading information.

Bloomberg has taken steps to repair the damage caused by the revelation.  Journalists’ access to certain client data has been cut off and the former CEO of IBM – Samuel Palmisano –- was hired to review the company's policies.

For further details, go to:   [ Bloomberg, 5/20/13 ].