Mostly… fixed income and cross product eTrading

September 11, 2007

fidessa/latentzero – why should you care?

Filed under: etrading, OMS / EMS — holky @ 5:11 am

Trader magazine looks at the fidessa/latentzero tie-up  here

Why do we in the fixed income space care?

Latentzero hooked up with fidessa because they needed a datacentre, a hosted offering, and a decent FIX connectivity hub – all of which fidessa have in spades. Fidessa see latentzero as a way to break out of their existing shape; a great presence among the UK equity market participants, but not so hot in Europe (kept at bay by GL) and even less of a footprint in the US.

Of course latentzero taking over more desktops pays dividends to fidessa in terms of getting their fidessa nuts and bolts onto the punters desktop….  and that’s where Reuters-Thomson and Bloomberg really need to watch out. Once latentzero-fidessa are on your desktop, why are you going to pay to get your market data through one of the current providers and also have to pay you tech guys to pipe that data into your desktop?

Yes were not talking about swaps or fixed income right now, but firms making big decisions about global licenses are surely more likely to side with a solution that on the face of it provides an absolutely nailed and integrated system for at least one product area (equity) and at least “talks the talk” of other products, especially if decent-name dealers are offering point to point distribution in those products in the (even if marketing speak) forseeable future….  Should we expect this to be adopted in spades if point to point means we are not so constrained by gui too (not transaction building blocks but breaks out of the existing constraints?)… What’s the alternative? Deploy a fragmented fixed income style environment of apps here and there and expensive desk jockeys rekeying things between them rather than really adding value somewhere else in transaction terms?

My unscientifically conducted “survey” reveals expectations are for latentzero to become the dominant part of the merged company over the next 18 months.    How are Bloomberg and Reuters-Thomson planning to fight this long term to stay on your desktop?



  1. Interesting conclusions. It’s interesting to see the different ways to add 2+2 to get to 746.

    I wonder if the author has ever worked with Fidessa or LatentZero and has any knowledge of the combined entity product roadmap???

    Comment by John Greenan — September 11, 2007 @ 7:31 am

  2. We care because Fixed Income was mentioned only once!

    Typically any “innovation” from these established OMS vendors will be a re-cut version of their equities offerings.

    Comment by waratah — September 11, 2007 @ 9:10 am

  3. John I’m interested why I’m 742 out then – is it LatentZero becoming the dominant part of the merged co? Or that there is any potential for threat to the existing fixed income vendors with what fidessa/lz eventually offer?

    Given the turbulence and change we’ve all seen in markets and participants over the last few years, how many vendor roadmaps have been followed to the letter? IMO there is a core offering they need to fully exploit (btw yes I work with fidessa and have seen their resource commitment for initially joining the dots), and once that is achieved, why would they as a company not take stock and look outside of their equity comfort zone and instead seek to conquer the world?

    Comment by holky — September 11, 2007 @ 6:10 pm

  4. Firstly, all of my information is public – I am not making any statements based on people I know at either firm. The difference between our views is of analysis NOT information.

    One other point, I have huge respect for the guys at Fidessa. I have worked with and for Fidessa and they have some very impressive intellects combining technical and business knowledge. I also work with LatentZero and while they don’t have the depth they do have an elegant design which is evolving and improving. So this is not a bitching session.

    I’m very sceptical for a few reasons, in no particular order…

    LZ does not have the resource base to become dominant. They do not pay enough to retain people for more than a few years apart from the “magic circle”.

    Management structure – who reports to whom. Seems to me that Fidessa get all the top slots.

    Product offering. Fidessa tried to go cross product way back – they were the second or third firm to certify with Liffe when LIFFE went electronic. Fidessa could not execute this very well and abandoned the product. In the photocopier room in Suffolk Lane there used to be a big box of the unused brochures….

    Existing product. At the moment you could use Fidessa with Open Access (their in-house sockets based messaging layer) to provide market data. And Fidessa have a market data workstation that offers this. Market data is moving rapidly though – look at the use of new wave vendors such as Wombat to provide low latency. Fidessa is a fantastic cash equity system that will scale till the cows come home but it’s not a low latency system.

    If Fidessa want to stay king of their core competency they cannot allow too much effort to be diverted from their core equities product.

    Market data usage is a matter of trust – do you trust an OMS vendor to provide market data? Bloomberg are _challenging_ to work with but they have love from front office personnel for the breadth and depth of functionality. Would Fidessa be willing to devote the money to putting in place the key functionality into their offering? Mike Bloomberg started in what 1983? It’s a lot of evolution and development to catch up to.

    Conflicts of interest. There are a number of conflicts of interest that have yet to bubble up to the surface.

    So here’s a choice – Fidessa buy LZ and become the king of the equity world. This is do-able in my view. Or they try and proliferate cross product. The limiting factor is not hiring the people (if they open the purse strings they can do that) I suggest it’s integrating the new people into the existing very successful structures. And that’s a challenge for the management. But no-one else can do that very well so why should FLZ be able to do it?

    It’s all early days at the moment but I suspect that the vision will be curtailed to “equity king” rather than cross product, based on the above.

    Rather than just offer a critique I think it fair to offer a view on what I think the product line will end up as

    F sell side – enterprise (you run the servers)
    F sell side – lite (F run the servers)
    LZ buy-side OMS/modelling/compliance – enterprise (you run the servers)
    LZ buy-side OMS/modelling/compliance – lite (F run the servers)
    LZ EMS – F run the servers and glue it into your OMS
    FLZ market data workstation
    FLZ transaction network

    Gradually over time all of the LZ – enterprise customers will move to the “lite” version.

    Once you have mature Ajax technology (see this for an example then it’s a no-brainer – buy-sides will get the hell out of hosting servers.

    The actual move that I think will be more interesting will be if Fidessa have the balls to buy a back office system and try and offer one system to rule them all for the sell-side. Then offer a back office product for the buy-side.

    Just imagine – you have an AJAX based sell side OR buy-side front AND back office system – all hosted externally with no need to worry about any hardware, upgrades and so on.

    Now, if they build that then they will take over the world…

    Comment by John Greenan — September 11, 2007 @ 7:46 pm

  5. At the risk of turning this into a love-in for fidessa I would like to clarify that I’m not having a pop in my original post, and that my experience of the firm is easily as good as any other vendor I’ve ever dealt with, with some of their guys going way out of their way to really help when it has mattered. I am also not suggesting any conflict between fidessa and lz management, indeed I am making the assumption that their existing product responsibilities will shift (blend) – once lz takes more and more of the centre stage by opening doors for the combined group that were previously shut.

    Given the importance I’ve always placed on what’s on the desktop at buyside in shaping the future of the electronic marketplace, I still think its the lz piece that makes a huge (if not “the”) difference to where the combined firm will go, and that this is a change that will be evident in the forseeable future. Given the work done (not just LZ) to attempt to break buyside desktop out of single assert class silos, i dont see an option to avoid being cross product for ever; can we completely rule out any deal being struck with a non-equity consortia regarding distribution of data/connectivity for that product set too?

    I liked the product projection John, think youre likely to be right – but for remaining enterprise users to migrate to hosted the move will need to be on an achievable step at a time basis, otherwise I think the untangling and repackaging of all of those years of development that the enterprise guys have done make that such a huge and high risk project that it gets bounced to “next year” in every budget/planning meeting.

    A single hosted front AND back office system is a great thought though, which I feel merits its own post shortly, so John I hope you will get stuck into that when it appears 🙂

    Comment by holky — September 13, 2007 @ 12:13 pm

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