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February 1, 2005

The Right FIX for An IOI?

By Peter Chapman

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Does the industry need another FIX engine? A Columbia, Md.-based start-up is bucking the odds in a crowded industry by introducing a new system that may make it easier for brokerages to manage orders and indications of interest (IOIs). The firm, Raptor Trading, is targeting its FIX gateway at small and mid-tier shops and has already landed five customers.

"There are a lot of systems with similar functionality," says Mark Hinman, Raptor's president. "But there is not one that has all the functionality pulled together in one package. We are unique."

FIX engines are computer servers used to send and receive messages coded in the industry standard FIX communications protocol. The technology allows trading desks to transmit orders, indications of interest, advertisements and reports across communications networks in a common language. FIX stands for Financial Information Exchange.

Raptor's FIX gateway has been compared to Reuters' TRIAD, a nine-year old FIX engine that lets brokers simplify the management of their indications of interest. The comparison is not surprising since Hinman was one of a handful of developers who built TRIAD in the mid-90s.

At the time, Hinman worked for a tiny Maryland software house called EASE Technologies. EASE launched TRIAD in 1996 with Alex. Brown & Sons, the first customer. The first version of TRIAD was not a FIX engine, but a consolidator of indications carried by the AutEx and Bridge networks.

Shortly after the launch, EASE entered into an agreement with Bridge Technology for marketing and distribution. The product became known as Bridge TRIAD. About 60 brokerages still use TRIAD.

Bridge went bankrupt in late 2000. Reuters bought some of its assets including the rights to sell TRIAD. Then, in 2002, Reuters paid about $9 million for the unit of EASE that owned TRIAD. Hinman and others became employees of Reuters. That relationship lasted only a year before Reuters shut down the Maryland group.

Hinman was out of a job, but wasted no time jumping back into the game. With nine years of TRIAD under his belt, he figured he knew what the industry wanted and set out to build it.

By 2003, though, the industry had become awash in FIX engines. FIX Protocol, Ltd., an industry association, lists over 100 vendors on its Website. Analysts predict consolidation. Some players have moved upstream, adding order management systems and FIX gateways to their product lines. The top vendors are Cameron Systems, Financial Fusion, NYFIX/Javelin, Solution Forge and B2BITS.

Hinman was undaunted and quickly landed Weeden & Co., a respected trading house, as a customer. The relationship gave Raptor the clout it needed to test, with about 30 vendors responsible for moving buyside order flow to the sellside. Without Weeden, many OMS vendors and network providers may have declined to test with a relative unknown.

Since Weeden, Raptor has signed four more brokerages, although it declines to name them. The firm is also close to signing a "major" deal with an undisclosed vendor, according to Raptor sales exec Teddy Lardos.

Raptor's execs say they are not just chasing TRIAD. They are after the entire FIX market, both in the U.S. and abroad. Some of its early clients don't even use TRIAD, says Hinman.

Weeden does use Triad. "We are a very aggre-