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July 27, 2005

SIA CONFAB Brings Out: The Order Routers

By Peter Chapman

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(Traders Magazine, July 2005) -- Vendors in the business of delivering orders from the buyside to the sellside were front and center at Wall Street's annual technology show. The Security Industry Association's Technology Management Conference & Exhibit, held in New York last month, had displays from about a dozen network vendors.

Some of the booth jockeys were looking exclusively for sellside-to-sellside business. Most of the largest though were touting their strengths on the buyside-to-sellside front.

Old stalwarts mixed with aggressive newcomers.

Thomson, Reuters, SunGard, Davidge/GL and TNS were part of the old guard. NYFIX and IMTrader were two of the up-and-comers. All were bullish on growth.

"We've experienced double digit growth in the number of connections we facilitate for the past five years," said SunGard exec Mark Volker. "The buyside is increasing the number of its connections."

Basically, order routing involves the sending of a FIX message containing trade information from a buyside order management system to a sellside order management system. Some vendors though are moving beyond the basics. Others struggle with the basics. At least one player is reinventing the basics.

Below is a sampling of vendors at the show and a look at their strategies.

IMTrader Takes AIM

Possibly the most innovative player in buyside-to-sellside connectivity is IMTrader.

The maverick vendor recently launched the IMTrader Network, which is integrated with America Online's vast instant messaging network. AIM, as it is called, has become a ubiquitous communication tool on buyside and sellside trading desks. And many of the text conversations carried by AIM consist of trade instructions.

IMTrader's technology is able to recognize trade instructions amongst all the other chit-chat within an instant message. It then converts the instructions into FIX messages. The FIX messages are then deposited into the brokers' order management systems.

"People love to send orders without the expense of maintaining point-to-point FIX connections and integration with an OMS," noted IMTrader chief executive Furqan Nazeeri. "Because of the ubiquity of AIM, we've created a tool that gives anybody on the buyside access to a network."

The two-year old IMTrader was spun off from buyside order management system vendor Eze Castle. It has signed up about 300 buyside shops employing some 700 traders for the routing service, according to Nazeeri. It has about a dozen brokers on the network with eight more currently in the pipeline.

The firm is targeting the thousands of money management firms that trade too infrequently to warrant the purchase of an order management system or a relationship with one of the major network suppliers.

SunGard Goes Beyond the Trade

As FIX connectivity becomes something of a commodity, its suppliers are scrambling to differentiate themselves. Some are building out globally. Others are offering additional services.

SunGard is one that believes the game is about more than order delivery. The sprawling financial technology firm is focused on "the whole trade life cycle," according to Volker. "We don't see ourselves as being just an order routing network," he says. "We also do FIX allocations and are signing more brokers to that every week."