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August 23, 2005

Meet ITG, The OMS Provider

By Michael Scotti

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  • Meet ITG, The OMS Provider
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Ray Killian of ITG strikes again

(Traders Magazine, August 2005) -- Ray Killian, President, Chairman, and Chief Executive Officer of Investment Technology Group (ITG), has a new title. Now call him "Dealmaker." ITG signed a definitive agreement last month to acquire the trade order management system Macgregor for $230 million in cash. The deal -which marks the fourth one in less than a year since Killian's return from retirement -is expected to add 6 cents to 8 cents to earnings in the first quarter of 2006.

The price is about four times projected 2005 revenues of $55 million. About 85 percent of Macgregor's revenues are recurring, which made the deal attractive, according to Killian. The deal was a reaction to the buyside sending more of its order flow directly to the point of execution, he said.

"That's valuable real estate, " said Killian, referring to the 110 Macgregor installations at money management firms with $5.5 trillion in assets under management. "We can see a lot of potential for revenue growth." Indeed, roughly, one-third of Macgregor's installs do little or no business with ITG. Between 300 million and 500 million shares flow through the Macgregor blotter daily. As the OMS has taken on a more strategic role, OMS providers have been able to charge a toll to brokers for receiving that flow.

ITG will continue to keep both its platform and Macgregor's platform broker-neutral. Killian said that roughly 17 percent of ITG's revenues come from broker-dealers, and he said he has no interest in alienating a key client base. "We don't intend to change our attitude," Killian said. He called the sellside "very good customers of ours." Killian said. The feedback from the brokers he's spoken to has been positive, Killian said.

On the institutional client side, after the purchase was announced, the ITG sales team received upbeat comments on the deal from the buyside, he said. "I'd say 95 percent were very enthusiastic about the deal. They thought it was logical. They thought it was sound."

Part of that may be because clients are demanding closer linkages between their front-end trading systems and their OMS, according to Killian. About 80 percent of the buyside have listed that as a top priority, he said.

"Swivel-chair technology is not the way they want to go," he said. All of the OMSs, including Macgregor, were either implementing or planning to install their own trading front-end into their systems. All these OMSs were told by clients that these systems had become critical, he added. ITG's acquisition gets Macgregor's clients there that much sooner, Killian said.

"The days of offering a single-stock DMA product are done."

Ray Killian