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April 30, 2001

Watching NYSE Floor Brokers: OMS Vendors Make Marketing Hay

By Peter Chapman

"Most of my customers have both BBSS and NYFIX and are looking for ways to consolidate on BBSS," said John Petschauer, president of Jav Central, a unit of FIX specialist Javelin Technologies, which offers the routing service to independent floor brokers and their customers. "NYFIX initially had some advantages such as ease-of-use, but the BBSS is turning the war back in the other direction now."

NYFIX also faces competition on the floor from a rival in the upstairs market. Tradeware, based in New York, sells OMSs to block desks and institutions. Last year, it debuted its Tradeware Floor Application on the floor. Early adopters were a few $2 brokers doing direct access business with institutional customers. Tradeware says it is in the midst of a 30-firm rollout. House broker Neuberger Berman is using the floor system in conjunction with Tradeware's upstairs OMS, Market Center.

Will Smithers, Tradeware's president, says most of his customers for the new service are $2 brokers and the smaller house brokers. Lawrence Helfant and Princeton Securities are examples. "The bigger guys - the Deutsche Banks, the Bear Stearns - take a while to crack," he said.

Smithers adds that most of the action on the floor is in transitioning brokers off of their existing systems and onto others. (By one estimate, only 20 percent of floor booths are not automated.) He says the competition is lively. "I could drop three or four names right now [of large brokers] that are seriously in contention," he said. "But I won't."

Upstairs Group

Upstairs, Tradeware is part of a group of vendors including SunGard, OM, S1 and royal blue trying to dethrone King NYFIX. (The NYSE's BBSS and some proprietary systems are also used on block desks.)

OM Technology debuted its Institutional Order Management (IOM) system last year. IOM connects to the BBSS on the floor over

"We're not going after the floor market," said Greg Johnston, general manager, securities systems at OM Technology. "We are connecting to the NYSE services at this stage because there is nothing there that we believe could match the level of support."

Johnston notes that traders have more than just Rule 123 to worry about. The NYSE plans to establish new reporting requirements similar to those of Nasdaq's OATS (Order Audit Trail System) program. "The first stage of [Rule] 123 is just to make sure firms are entering those orders in an electronic format," he said. "There are even more rules coming down the pike. That's why our background in the Nasdaq market is very helpful."

Stepped-up competition among vendors upstairs is good news for both block traders and floor traders. For floor traders, it's even as important as the stepped-up competition on the floor. That's because most of them do not want to type in orders - either before or after a trade. They want their customers to do the typing. All of the upstairs OMSs now connect to an OMS on the floor so the chances of an order arriving electronically are greater.