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January 1, 2002

Can Reuters Deliver Middleware Goods? A New Gamble on Retail Business

By Brian O'Connell

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  • Can Reuters Deliver Middleware Goods? A New Gamble on Retail Business

Content and connectivity, say analysts, are the new mantra at Reuters institutional financial division, the global market data giant fighting to stay profitable.

One sign of all this is a heavy investment by Reuters - supported by its e-commerce unit, Tibco Software - in new middleware trading software.

That's the fancy way to describe computer products that connect front and back office software together, a connnection designed to eliminate the intervention of human hands in the trade execution process.

The outcome, say analysts, could result in improved order flow, trade execution, news and data delivery processes for its client base - a group that includes market makers, buyside trading firms and brokerage houses.

"Reuters is reinventing itself for the challenges facing the financial industry: multiple pools of liquidity, increased transaction volumes, and more pressure to reduce costs," said Philip Green, chief operating officer of Reuters Group PLC. "The key is to implement a broad range of Internet technologies within our core business, as well as across strategic partnerships."

At the core of the Reuters trading systems strategy is its three-year-old relationship with Tibco Software, which was recently folded into a new Reuters business unit called Reuters Financial Solutions.

Tibco provides the unglamorous but critical middleware applications to Reuters trading and information systems.

The company rose to prominence in the late-1980s as a supplier of the first digital trading systems to many of Wall Street's largest banks and investment houses.

Over the years, the company has adapted its Information Business market data delivery mechanism to incorporate industry demands for guaranteed message switching between front, middle and back offices.

That's a function that enables equity trading firms to run trades from execution to settlement in a seamless, real-time environment.

Tibco's middleware component enables customers like Nasdaq, London's International Financial Futures Exchange (LIFFE), and the Colombo Stock Exchange (CSE), to eliminate multiple connections to multiple disparate systems and replace them with a single common interface.

Nasdaq Mission

In a multi-million dollar agreement with Tibco in 1998, Nasdaq agreed to adopt Tibco's ActiveEnterprise middleware just as the exchange was ramping up to accommodate trading volume of between 750 million and 1 billion shares a day. That threatened to overwhelm Nasdaq's proprietary network, which required millions of messages to be sent simultaneously to thousands of users every second.

Now Tibco not only helps streamline Nasdaq's internal systems, it forms the basis of a giant messaging hub, embracing connections with screen-based traders and third-party data vendors.

Rather than creating and disseminating multiple copies of the same message, the Tibco system instead pushes out a single update for instantaneous download and display by all subscribers to the Nasdaq network.

It's a blueprint that Reuters hopes will get it beyond the retail trading market into the institutional market, which is its core base.

"It's fair to say that we're hoping our work with Tibco on the retail end is a justifiable excuse to get us further ahead in the institutional business," said Derek Edelman, vice president of brokerage services at Reuters.

Using Tibco's middleware platform, Reuters is lining up new deals with clients and vendors to allow it to "go beyond traditional trading applications to enterprise-wide offerings," Green said.