Mostly… fixed income and cross product eTrading

October 30, 2007

Project “Utility”

Filed under: 2015, etrading, OMS / EMS — holky @ 10:20 pm

Another question from roving reporter John…putting me to shame in terms of the number of serious posts recently.

So, we live in a world where Investment Banks compete fiercely in most areas (a good thing) but also collaborate (ie Boat, Turquoise) when appropriate. And that’s sensible, horses for courses. At the moment the sell-sides either buy or build their connectivity infrastructure and most have a mix of Fidessa, ORC, GL Trade, Cameron, TransactTools, Javelin (NYFIX) Appia and so on. On the buy side in the last five or six years there have only really been two choices – Charles River or LatentZero. And that lack of competition is a bad thing.

So, a modest proposal. Why don’t the heads of connectivity from Morgan Stanley, Merrill Lynch, Credit Suisse, Goldman Sachs, Lehman Brothers, Bear Stearns and so on stop buying EMS vendors and actually set up a broker neutral OMS/EMS. Neutral by design and by ownership. Genuinely FIX compliant and given to any buy-side that wants it – client of the owning banks or not. Charge it out on a rental model – a modest rental per dealer per month – maybe say $1,000??

Maybe even look to Open Source it for the hedgies and the funkier chaps with more tech smarts…

Or is that what the $180million investment in Thomson Tradeweb was all about?

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bye ABN .. hello Tullet’s

Filed under: etrading — holky @ 1:44 pm

In case you didnt already know, official announcement is out now about the ABN ecommerce crew moving to Tullets (TradeBlade)

Swearing

Filed under: Uncategorized — holky @ 1:13 pm

No, its not b*llocks – swearing in the office can have a positive effect … but have you ever wondered who builds the swearword dictionaries for applications?  and how you would go about interviewing an ‘expert’ in this field; clearly you need proof that they truly know their subject, so they are not just an amateur with a couple of big bad words, and they are not just talking a good game of researching words and phrases bound to offend!

October 15, 2007

What do you want an OMS for?

Filed under: etrading, OMS / EMS — holky @ 3:51 pm

Having been pretty much bang on with last post about Thomson .. Where next?..  here’s more from John.

Here’s a question that seems to be missed in the current market, where all talk is of OMS, EMS, OEMS and any number of combinations of an OMS and many EMSes. Let’s look at the history of the OMS and it’s younger brother the EMS and see what’s missing….

The modern OMS is generally regarded as being the offspring of Seth Merrin with Merrin Financial. The OMS became popular as a way to provide a system for the front office as a counterpart to the widespread usage of back office systems such as HiPortfolio, Pacer and so on. Originally the OMS simply replaced paper tickets; it provided a replacement for the timestamp and allowed dealers to store execution information based on telephone broker relationships and dealing.

At the same time as the OMS started to come into widespread usage so did FIX. The co-existence of the two is well documented – there is now no serious OMS that does not include FIX connectivity. But this parallel development was the root cause of the problems that are now facing the buy-side OMS world. Simply put, the buy-side OMS vendors had to have FIX in order to get through the RFI/RFP/ITT cycle and the buy-sides IT departments knew that they had to have a convincing story of being able to “do FIX”.Vendors scurried around for a story and often came out with the idea of partnering with a lead client that would be the first to go live with FIX – as the vendor coded up requirements from the buy-side. Alas it was a case of the blind leading the blind. The buy-sides had very little experience or knowledge of FIX and the vendors had even less. After several years of catching up the vendors are still behind the market in terms of functionality and the market is taking great leaps ahead with Algos and dark pools proliferating.

The problems of actually implementing FIX within a buy-side are well known by anyone who has done so – the micro level bugs and issues are compounded by a lack of testing infrastructure at the vendor and a lack of understanding of the workflows associated with electronic trading. So what happens in the larger buy-side? The course that many large buy-sides are taking is to buy an EMS and hope to remove the connectivity piece from the OMS – rather than put right the issues, give the problem to another vendor (or part of the same vendor). Let’s back track here a little. What is an “OMS”? Generally it’s actually three functional pieces and a shared data layer sitting upon a common database or real-time platform.Portfolio modelling / rebalancing / order generation – used by the Fund Manager Compliance – used by Fund Manager to ensure orders are compliant Order management – used by the dealer to keep track of orders sent to brokers by FIX/telephone/spreadsheet

Now, if a buy-side pulls the order management and dealing function out of the OMS and has an EMS perform this function then what does the old dealer order management piece do? In an EMS world it’s not unfair to say that the dealer piece is acting as an expensive piece of middleware – sitting between the Fund Managers and their modelling/rebalancing/order generation and compliance functionality and the EMS with it’s connections to brokers for execution.

So, ask the question: If you were a big buy-side looking to make a great leap in technology – would you rip out the dealer order management function and simply use an EMS at the front end?

Which firms are best placed to take advantage of that shift? And who can take advantage of their incumbent position to bend the will of the market?

There are a lot of unanswered questions in this market space but it’s one where vendors are engaging in a high stakes game to ensure that they come out on top. Right now, it’s a great time to be in a buy-side working on connectivity as the vendors in the market are jousting for business and are willing to engage in partnerships and risk sharing that was not on the table a few years ago.

October 9, 2007

Fusion and Liquidity Hub: Tradeweb 1, everyone else 0

Filed under: 2015, etrading — holky @ 7:44 am

Of course once Project Fusion announces a done deal and Liquidity Hub distribution drifts to Tradeweb as part of the Thomson/Reuters thing (though see torygraph), all roads appear to lead to Tradeweb – that’ll be the platform that all the dealers you care about are in, one way or another, so that’s the platform youll need on your desk.  Does that make a sizeable investment in Tradeweb, as part of the Thomson group that could accomplish many other things in the etrading space, an understandable medium term play? … especially when the other dealer concerns from 18 months ago are surely now addressed too; direct dealer fees and also issues regarding who owns the market data.

Turquoise and PLUS

Filed under: 2015 — holky @ 6:51 am

Word is (also mentioned here) that Plus markets is in line for a neat reverse takeover of Turquoise – which would appear to address all of the comments and criticisms that turquoise hasnt been recruiting and actually building anything material .. I wonder how all this sits with the previously proposed launch date of April next year?

October 3, 2007

MTS to be investor-order-driven

Filed under: etrading, Nuts and Bolts — holky @ 7:15 am

EFN says and FT says that MTS is abandoning its long established system of market-making in order to embrace an investor order-driven model .. with Carlos San Basilio, a member of the MTS Management Board, saying “There is a whole new concept behind EuroMTS. We are moving towards an order-driven environment and that is a big change for us. It is important to move into a more flexible environment with less obligations for participants.”

Will having significant order-driven markets in fixed income too be the catalyst for sellsides who have not yet done so to start centralising their order quoting into a single infrastructure?

October 1, 2007

Mifid consultants

Filed under: Mifid — holky @ 3:31 pm

….so what are all the mifid consultants going to do from next month onwards?

Move Towards Cross Asset Algorithms

Filed under: etrading, Nuts and Bolts — holky @ 9:55 am

In the EFN article about algorithmic trading getting smarter, we hear that algorithms are spreading accross asset classes from equities to futures and options to foreign exchange, as companies look at cross asset trading to hedge a position.  This approach is also being fuelled also as part of desire for risk mitigation of ‘unexpected events’ given recent market conditions, but could this just be putting an additional risk in the making?  With the current generation of sellside pricing and trading systems all still being largely product specific (indeed, product silo’d), could one market upset lead to an enormous cross asset meltdown as every dealers plumbing that has been put in place to join the dots is put under pressure?

Hedge Funds and Dealers

Filed under: 2015, etrading — holky @ 9:13 am

So at a time that GFI boss defends hedge funds’ access to interdealer venues, saying dealers broadly support this in order to hold back the threat of futures exchanges extending into exchange traded versions of hitherto OTC products, we also hear that Euro governments aim to break MTS monopoly with Danish, Dutch, and Belgian govts specifically supporting their benchmarks being traded on ICAP and other IDB platforms.  Two separate threads on different product areas admidst a landscape of change .. all pointing to the separating edge between hedgies and dealers being challenged.  And both at least pointing towards the ideal of being able to do business where it is best for you to do so.

LSE completes its merger with Borsa Italiana

Filed under: 2015, etrading — holky @ 8:40 am

The combined group is:

  • Europe’s leading equities business, with 48 per cent of the FTSEurofirst 100 by market capitalisation and the most liquid order book by value and volume traded;
  • Europe’s leading market for electronic trading of ETFs and securitised derivatives; and
  • Europe’s leading fixed income market, through its interest in MTS.

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