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BlackRock Trading Venture Leaves Questions

Stocks in this article: BLK GS

NEW YORK (TheStreet) - BlackRock Inc. (BLK)'s bid to take trading business from Wall Street appears to have faced some setbacks, and many questions remain about what exactly the world's largest money manager is planning and what it hopes to accomplish.

BlackRock, scheduled to report first-quarter earnings before the market opens on Wednesday, has been working since at least 2009 on a global trading platform that will allow its clients and other money managers to trade with each other, rather than going through securities dealers like Goldman Sachs (GS) or JPMorgan Chase (JPM).

The much-anticipated trading platform, a potentially game-changing venture that threatens to put BlackRock in direct competition with Wall Street, got some fresh attention last week from a pair of news reports. Still, recent statements BlackRock has made about the trading platform, which it says it expects to call the Aladdin Trading Network, are somewhat puzzling.

The Aladdin Trading Network (ATN), is a response to an environment in which Wall Street banks are putting less capital at risk to support trading activity.

Primary dealer corporate bond inventories are some 80% off their highs of $235 billion in 2007, according to Federal Reserve data.

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That creates a real problem for investors like BlackRock and other bond managers. BlackRock also argues "trading costs remain too high for certain types of securities," according to spokesman Brian Beades.

But there has been turnover at the top of BlackRock's trading initiative and mixed signals as it has been developed.

Minder Cheng, the executive from Barclays Global Investors who was originally tasked with developing ATN, quietly left BlackRock in July 2010. Beades declined to discuss Cheng's departure and Cheng did not respond to an email message asking about it.

The platform also looks to have faced some delays. BlackRock CEO and Chairman Larry Fink said in a January 2011 earnings call it would be up and running by the second half end of 2011. A year later, however, he seemed almost to back away from the plan.

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"My greatest hope is that we don't have to do this, that the liquidity in Wall Street is greater than ever before, the bid-ask spread is tighter than ever before, and I'm spending a lot of money for nothing," Fink told investors during a Jan. 19 conference call this year.

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