Hong Kong's biggest bond dealers - HSBC, Citigroup and Deutsche Bank - will today unveil an alliance aimed at taking bond trading live on to the Internet. The three banks will announce a tie-up with technology provider Bridge Information Systems to bring what they call 'killer applications' - execution and liquidity - to the young online bond trading business in Hong Kong. The move would cut costs for investors, raise the profile of the region's high-yielding bonds and boost Hong Kong's bid to be the main centre for trading Asia's US$593 billion bond portfolio, dealers said. At present, an average of about US$2.64 billion of bonds are traded in Hong Kong daily, generating fee incomes for intermediaries estimated at about US$60.5 million a year, according to dealers. During the past three months the value of bonds traded was about double the figure for a typical daily turnover on the Hong Kong equity market. The joint venture will be called BondsInAsia. The company, in which each of the 'charter members' will hold 25 per cent, will build and operate a technology platform which will enable automatic on-screen matching of buyers and sellers and instant execution of trades at the click of a button. It will then franchise the turnkey platforms to separate companies set up to deal in specific bond products. The first will be BondsInHongKong, followed by a Singapore dollar franchise, and bonds denominated in US dollars, euros and yen. The Hong Kong franchise will include the charter members and will be open to any other dealer in that market prepared to come up with the equity and deliver the service to the required standard. In recent months, a number of Internet-based bond trading services have sprung up in Hong Kong, but until now, most have been research-based Web sites offering only a 'price inquiry' service. This requires subscribers to call up bond-trading desks in order to transact orders on their behalf. One of these service providers - asiabondportal.com - plans to roll out a pilot launch of an automatic matching service next month, according to chief executive Francis Tjia. Deutsche Bank is also a partner in asiabondportal.com - together with US investment bank JP Morgan and the Singapore Government's investment arm, SGIC - but Mr Tjia said last night he was confident Deutsche would remain on board as a partner. On present timetables, asiabondportal.com looks set to be first to the market with an online system, since it plans to complete its pilot and launch the service in October, while BondsInAsia is due to launch in the first quarter of the new year. But dealers said the key to success in the new online bond trading business would be the number of participating market-makers who post prices on the sites and the volume of trading done in the new electronic marketplaces. HSBC's bond-dealing desk, they pointed out, dominated trade in HK dollar-denominated bonds, in which it has more than a 50 per cent share. The three partners to the joint venture would together be responsible for more than 50 per cent of Hong Kong-based trades in Singapore, US, euro and yen-denominated bonds as well, they said. Benefits anticipated for investors from the new services would include lower transaction costs and improved market transparency. Present costs of buying or selling bonds varies depending on the nature of the bond and the location of the trade. But for a bill, dealers said the cost would typically amount to one basis point and in some locations two basis points per one million of face value - or US$25 and US$50 per US$1 million. Government bonds are typically transacted in the range of 100 basis points to 200 basis points per million, and most corporate bonds, depending on liquidity, are usually 200 basis points to 400 basis points per million. The online service envisaged by the Big Three bond dealers would aim to be competitive with these rates, dealers said. This will mean it is likely to cannibalise business from its existing dealing rooms, a factor the partners would have taken into account. 'There is no doubt that electronic execution offers significant attractions to clients and is margin-destroying,' a dealer said. 'But if you are realistic, you have to realise the migration to the Internet is likely to be inevitable and if you can't beat them, you may as well join them.'