Automated Bond System (ABS)

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Definition: Automated Bond System (ABS)

ABS is the system adopted by the New York Stock Exchange to maintain records of Bid/Ask prices for bonds that are not traded too frequently. The issues of inactive / bonds not traded too frequently is that there may not be otherwise ready quotes available.

It is expected of an exchange, to be a market maker – a market maker by definition should be able to offer a bid and an ask rate readily. The profits made, are on the bid and ask spread between the 2 values quoted.

Even if there are, there might not be significant movement owing to lack of supply/demand changes. The Automated Bond System sort of acts as a common-ground.

Given the low activity on these bonds, every single trade that happens would be a pointer to some change in demand / supply movements. These, if tracked closely could help gauge what the best quotes might be. So the NYSE acts as an aggregator of such information.


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