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December 6, 2006

GL Trade Sets its Sights on U.S.

By Melanie Wold

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GL Trade, a Paris-based provider of trading solutions, is making a push into the United States and trying to find a niche in the sellside order management systems (OMS) market. But critics say the market is already saturated with SunGard's Brass, Royalblue's Fidessa, and-to a lesser extent-Bloomberg, NYFIX and Citigroup's Lava Trading. GL Trade traditionally has been strong in European and Asian equities with its market access software. It started its OMS quest in 2003, when it bought three businesses from Misys Group, including an OMS division.

Then in 2004 it bought Davidge Data Systems in New York, a U.S. equities and options order-routing firm. This gave GL Trade a leg-up on options and equities order routing, as well as connectivity facilities for U.S. cash markets.

"The U.S. is the center of our strategy," says Christophe Dacre-Wright, chief operating officer of GL Trade Americas. He believes the company's experience selling OMSs in Europe and Asia over the last two years gives it a "huge amount" of know-how and insight into how to crack the U.S. market.

Dacre-Wright sees opportunities in the States largely because of the changes wrought by Regulation NMS. "We looked at the OMS market in the U.S. and saw an opportunity," he says. Dacre-Wright also believes GL Trade's competitors may be struggling to accommodate the changes necessary for best-execution compliance.

Mature Business

Consultant David Cox, a vice president who heads global research at research firm Financial Insights, points out that the "OMS market on both the buyside and sellside is certainly very mature, if not saturated." He adds that Reg NMS requires connecting with multiple trading environments. "To the extent that current OMS vendors cannot respond to these challenges, then they will, of course, be replaced by other systems," Cox says. "To that extent there is opportunity."

However, other OMS vendors say they are on top of the market structure changes. Some are immersed in the process of integrating their OMSs with their execution management systems (EMSs). The goal is to provide customers with a single, efficient technology platform.

There are a number of reasons behind that strategy. Mark Ames, CEO of Fidessa, says Reg NMS is just one of the factors driving vendors to rethink their OMS and EMS offerings. "Increasingly stringent NASD guidance is another driver. The sellside has to be aware of the details surrounding orders, which is difficult when there are disparate EMS and OMS systems. They need tight integration between the systems," Ames says.

Brokers also want to cut costs to vendors, he says, so paying for two systems just doesn't make economic sense. "You receive the order. The OMS captures it. Then the traders use an EMS, and that is a fuzzy step: it involves either re-keying or an order-routing mechanism, which is inefficient. Systems limitations do not offer any exemption to best execution."

Fidessa, which has 45 U.S. customers, offers its OMS and EMS on the same platform, "so we can control both ends of the integration," Ames says.

Lines Blurring