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Spoofing, Surveillance and Supervision

Jay Biondo, Product Manager - Surveillance at Trading Technologies, co-authored an article along with James Lundy and Nicholas Wendland, both of Drinker Biddle & Reath LLP, reviewing the CFTC's regulations and expanding efforts, 21st century surveillance and supervision, as well as strategic recommendations.

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May 31, 2003

A Royal Battle in the OMS Market: U.K. Supplier Is Shaking Things Up In the U.S.

By Peter Chapman

Until recently, Royalblue was one of those. The firm is the dominant supplier of sellside order management systems in the U.K., but made little headway in the U.S. after establishing a beachhead in 1998. It won Banc of America and SG Cowen in short order, but complaints about Fidessa emanating from those shops slowed Royalblue's progress.

It spent two years - from 2000 to 2002 - attacking its perceived shortcomings. The result is its new V5 infrastructure, a soup-to-nuts rebuild of Fidessa. "The infrastructure we built over the past two years represents the most radical change to the system since I joined the firm ten years ago," said chief technology officer Mark Ames. "We gained massive increases in performance and scalability."

Chafatinos added: "V5 gives us the ability to process ten-fold the amount of orders and trades we were able to process before."

Ames acknowledged performance was at issue, but says it only became one because Royalblue's competitors overstated their capabilities.

"Other people were, and probably still are, a little unreal about the volumes they handled," he said. "We'd always been real' about the volumes we handled."

Nonetheless, to eliminate clients' concerns, Royalblue went back to the drawing board. "The Merrills and the Bears wanted it to be a non-issue," Ames added.

Bear Stearns appears pleased. The trading house shelved its proprietary system in favor of Fidessa. "So far, so good," said Aldo Parcesepe, Bear's head of Nasdaq trading.

Bear went with Fidessa because it decided building systems was not a core activity, according to Parcesepe. It was a trading shop; best to leave the systems building to the vendors. Bear also uses Fidessa in Europe. The plan is to eventually move listed trading onto Fidessa.

Sang Lee, an analyst with consulting and research shop Celent, says Royalblue's efforts have been successful. "We are seeing the ascendance of Royalblue," he said. "Royalblue has made tremendous progress in going after Tier One and Tier Two brokerages."

Lee, who is conducting a survey of the sellside OMS market, divides the sellside into four tiers. The top tier includes the 10 biggest broker dealers. Tier Two comprises the next 50.

Despite Royalblue's growth in the U.S., SunGard Trading Systems' chief executive Tom King remains confident. "Our model has changed in terms of our target market," King said. "The whole market has changed. If they are shooting for what BRASS was one year or six months ago, they are shooting for the wrong target."

Paraphrasing the title of a popular book on management by author Dr. Spencer Johnson, King added: "The cheese has moved. [Broker dealers] are looking for different things. And we are on the cutting edge."

Johnson's bestseller "Who Moved My Cheese" tells the tale of four mice in a maze who wake up one day to discover the cheese has moved. Some are prepared. Some aren't. Sungard, King says, will soon introduce new products that will "establish the proof" of its adaptability.

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