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July 31, 2003

Listed and Nasdaq Meet

By Peter Chapman

Also in this article

The OMS World Produces a Solitary Platform

Two vendors of sellside trading systems have started pushing integrated listed and Nasdaq platforms.

In a sign the bifurcated market for order management systems is converging, Lava Trading and NYFIX are each offering brokerages a solitary platform in which to trade both OTC and listed securities. The plans reflect both customer cost-cutting needs as well as the increased fragmentation of the listed market.

Lava Trading, best known for its front-end technology, is moving into the order management business with its ColorPalette system. NYFIX, which just acquired Renaissance Trading Technologies, plans to integrate its FIXTrader OMS for listed trading with Renaissance's Platinum OMS for Nasdaq trading.

The initiatives bring to four the number of top-tier vendors offering integrated solutions. Lava and NYFIX will bang heads with rivals SunGard Trading Systems and its ubiquitous BRASS/UMA combination and royalblue with its Fidessa/Montage offering.

Traditionally, the market for Nasdaq order management systems was separate and distinct from that for listed systems. SunGard dominated the Nasdaq space; NYFIX, the listed.

But, in the past few years, brokerages have come to view the U.S. stock market as an integrated whole. At the same time, the profitability of trading desks also has been hammered by decimalization and the bear market.

In response, brokerage officials are asking vendors to provide them with a single system. One that will allow them to trade both "seamlessly" and even simultaneously in both markets and reduce infrastructure costs.

"Customers are in a serious cost-cutting mode," said Keith Jamaitis, chief operating officer of NYFIX, "so, they want a very efficient trading solution. They also want a uniform platform across their listed and over-the-counter desks."

Last month, NYFIX paid about $7.5 million in cash and stock for the 82 percent of Renaissance it did not already own. The move comes nine months after NYFIX took its initial stake in the firm. The firm is run by trading technology execs from the now-defunct brokerage Robertson Stephens. Renaissance's Platinum platform was used by Robbie Stephens' Nasdaq desk for about a month.

The new combined system is called NYFIX Platinum. It is in production at three houses, including JMP Securities and ING, according to Jamaitis. The technology is being installed at four more brokerages, the exec adds. JMP and ING are both small shops, but NYFIX has "more substantial names coming down the pipe," said Jamaitis.

FIX Protocol

To be accurate, NYFIX Platinum is one system in name only. Although the marketing is conducted under the NYFIX Platinum banner, the actual deployment is of FIXTrader and Platinum. The two systems are integrated via the FIX communications protocol.

The two systems do share certain middle office components, including those that handle allocations and clearing, according to Jamaitis. NYFIX plans to make the desktops of the respective systems more uniform. It will embed some of the risk market data features from Platinum into FIXTrader. It will also embed some of the one-touch trading and "block trader-centric" features of FIXTrader into Platinum. In addition, Platinum's QMS quote aggregation and market access technology will become part of FIXTrader.

Lava says ColorPalette is more evolved than systems offered by competitors.