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February 1, 2004

An OMS Body Snatcher

By Editorial Staff

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In the beginning, there was BRASS. For over a decade, the sellside order management system sold by SunGard Trading Systems was ubiquitous on Nasdaq trading desks. So-called Brass-killers' came and went. SunGard maintained its grip on the notoriously demanding market and even expanded into the listed side.

But in the past two years, things have started to change. Royalblue, a British vendor in the states from the mid-90s, has finally started to gain some traction. Last year, its Fidessa system scored big wins in the trading rooms of Merrill Lynch and Bear Stearns.

Bloomberg L.P., the market data giant, entered the low end of the market, taking advantage of the industry's hard times and its need to cut costs. With the bear market and penny ticks cutting into Nasdaq dealers' profits, a Bloomberg package of market data and order management for $1,350 per terminal per month sounded good.

Bloomberg's purpose in offering an OMS to small and mid-tier sellside equity trading desks was to sell more terminals. The vendor, best known for its news, prices, and analytics, was having a tough time cracking the lower echelons of Wall Street.

Bloomberg long ago saturated the upper tier. For the bulge bracket, the Bloomberg is a must-have. A typical bulge shop has placed the terminals in front of most of its equity traders. But for the smaller shops, $1,350 is too much to spend on every trader.

So, in order to win over the less-rich, Bloomberg added an OMS to the mix. The package has proved irresistible to 30 firms in the U.S. and five in Europe, according to Bloomberg. Of the 30 U.S. customers, about 10 ditched BRASS and four ditched NasdaqTools, Nasdaq's ill-fated venture into order management.

Not all of Bloomberg's customers are small. Although it has its share of Delafield Hambrechts and B. Rileys, the vendor recently landed Southwest Securities, a large regional in Texas. Bloomberg also boasts Pacific Crest, May Financial, a unit of Southwest, Wedbush Morgan, and Howe Barnes as customers. Wedbush was the first. Southwest, B. Riley and Howe Barnes are also users of Bloomberg's fixed income OMS.

Despite Bloomberg's progress, its OMS is not nearly as sophisticated as BRASS or Fidessa, according to some trading pros. It lacks much of the functionality demanded by the larger trading shops. That's listed trading, multi-capacity Nasdaq trading and single-screen market center aggregation.

Running the vendor's sellside equity OMS operation are Adam Ross, formerly a compliance exec with Volpe Brown, and Bob Boylan, a 13-year Bloomberg vet who previously oversaw Bloomberg's sellside fixed income OMS group. Technology editor Peter Chapman sat down with the two to discuss Bloomberg's strategy.

Traders: How does Bloomberg tier the market?

Boylan: Domestically, there are three tiers: the bulge bracket; the regionals and super-regionals; and the pure agency shops or boutiques. This last group is smaller and may or may not have banking and research. Certainly not a lot of retail.

Traders: And you are targeting tiers two and three?