Automated bond system (ABS) – definition and meaning

The Automated Bond System (ABS) is an electronic bond information and trading platform that tracks the prices of inactive bonds on the New York Stock Exchange (NYSE).

The computerized system allows investors to have access to a database of bond prices – recording the bids and offers for inactive bonds until they are either sold or terminated.

According to nasdaq.com, the Automated Bond System (ABS) is:

“The computerized system that records bids and offers for inactively traded bonds until they are cancelled or executed on the NYSE.”

By electronically monitoring all inactive bonds, NYSE can maintain a significant inventory of bond prices, in case investors wish to buy them.

The reason why the ABS exists is because many bonds do not experience significant short-term price fluctuations due to their extremely low volume. This essentially means that some bonds are in a market that is almost non-existent.

However, despite the fact that some bonds on the NYSE are inactive, they are still available to be exchanged. The ABS provides information for investors on the prices of these financial instruments and allows the NYSE to have an up-to-date inventory of bond prices.

Online ABS service started in 2006

In 2006, the NYSE introduced a series of online features to its public website that it claimed “provides public investors with convenient and significantly improved access to information and pricing for bonds traded through the Automated Bond System (ABS).”

The then new set of investor tools included enhanced data tables, issue categorization, and sorting mechanisms in the broader fixed-income market.

On unveiling the new service, the NYSE wrote:

“In addition to the new directory of bonds sorted by name, symbol and issue type, investors now have the ability to view the most actively traded issues from the prior day, download a detailed daily bond summary archived by date, and explore a glossary of bond-related terms that provides explanations of key words and phrases.”

“The addition of these features gives the investing public a central resource for all fixed-income instruments traded by NYSE member-firm subscribers using the ABS platform.”

Subscribers can access the ABS electronic bond-trading platform online. It mainly serves retail traders in corporate bonds. “NYSE’s Automated Bond System maintains and matches orders on a strict price and time priority basis, and reports quotations and trade prices on an absolute real-time basis,” said the NYSE.

In 2007, a new system was introduced.

Video – NYSE Bonds