US firm Coudert Brothers' growing capital markets practice in London is working on a unique European project for trading euro-denominated government bonds.
The firm is helping set up a City-based electronic exchange that it says will give international banks a faster, cheaper and more liquid alternative to "over the counter" trading.
Couderts partner Dean Poster says: "This is intended to be the main hub for the most liquid euro-denominated government securities in Europe."
The system is to be run by EuroMTS, an English company set up specially for the task.
Couderts' client is the Italian securities exchange MTS, which owns a 75 per cent stake in EuroMTS. The other 25 per cent is held by 24 major banks and investment houses including Deutsche Bank, ABN Amro, Banque Paribas, Barclays JP Morgan and Goldman Sachs.
Poster, who is spearheading the legal work, says the new system is needed because of increasing harmonisation in Europe. "Since 1 January, European governments are now required to denominate their bonds in euros."
At present, most bond trading is done directly between parties on proprietorial systems, and the EuroMTS system is expected to be a major development.
It will initially trade German, French and Italian debt, focusing on "benchmark" - the most popular and liquid - bonds.
The MTS exchange was owned by the Italian state until its privatisation last year. "MTS is a leading player in the new system because it has a ten-year record providing a seamless, workable platform for trading in some of Europe's most liquid bonds," says Poster.