Financial Firms Said to Seek Alternative to Bloomberg Chat

A Bloomberg terminal on the floor of the New York Stock Exchange. Brendan McDermid/ReutersA Bloomberg terminal on the floor of the New York Stock Exchange.

Nine Wall Street firms have been actively involved in creating an alternative to one of Bloomberg L.P.’s most widely used programs, its chat messaging network, people briefed on the effort said.

The development predates the controversy over Bloomberg journalists being given access to sensitive customer information, but it could spell trouble for Bloomberg, because the company’s chat program is one of the main selling points for its $20,000-a-year terminals. Banks have been looking for ways to lessen their reliance on the terminals and 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.

Reuters and Markit are said to be working in cooperation with banks including Barclays, Citigroup and JPMorgan Chase, the people said. 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 said: “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.”

The effort to create a new messaging network was in motion months before Bloomberg’s customers began to complain about the confidential information available to Bloomberg journalists. Both developments underscore the frustration on Wall Street with the powerful place that Bloomberg occupies in the financial infrastructure, and the lack of alternatives to its expensive terminals.

“If they are unhappy about the pricing, if they are unhappy about the fact that they are locked in, any alternative would be better,” said Sang Lee, co-founder of the financial consulting firm Aite Group.

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There are already countless messaging services, but Bloomberg’s has been around for years and is considered essential because the Wall Street banks and their customers are all on it. What makes the service so valuable to Bloomberg is that access 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.

None of the firms involved responded to requests for comment on the project. A spokesman for Reuters, Yvonne Diaz, declined to comment specifically on the project but said: “We are committed to providing open platforms that support connectivity, communication and collaboration across the financial markets community and to continually improving our customers’ experience in these areas.”

Any new messaging service is likely to gain traction only if 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. The new system will also need to convince users that it is secure enough to communicate sensitive trading information.

Bloomberg has taken several steps to repair the damage done by the revelation that its journalists could view certain information, like the last time clients logged onto their Bloomberg terminals. It cut off journalists’ access to that data and appointed the former chief executive of I.B.M., Samuel J. Palmisano, on Friday to review its policies. A Bloomberg spokesman declined to comment on the competitors’ efforts.

Sales of Bloomberg terminals have been slowing in recent years, leading Bloomberg to expand into several new businesses, including some that are in competition with its customers. That has helped stoke Wall Street’s desire to search for ways to decrease its reliance on Bloomberg services.