Storm Copestand
Traders Magazine Online News

Conquering Fear in Trading

In this exclusive to Traders Magazine, therapist Storm Copestand examines how traders can manage expectations and conquer their fear during the entire execution process.

Traders Poll

Amid changes in builder, do you think the CAT project will be completed by 2020?

Free Site Registration

January 31, 2008

OMS Vendors Regroup

NYFIX says sayonara to market-making systems

By Peter Chapman

Also in this article

NYFIX's sudden decision last year to stop selling order management systems to market makers highlights the difficulties vendors face in supporting this segment of the sellside market. The three vendors that remain acknowledge the challenges, but claim their multi-faceted strategies fit the times.

NYFIX, financially the weakest of the top firms, exited the business because it was facing a "contracting market" for its Fusion OMS, it said, and needed to focus resources on higher growth areas. Fusion was expected to contribute only about $3 million out of an estimated $120 million in revenues at NYFIX last year. The vendor's exit leaves most of the market-maker business in the hands of Fidessa, SunGard and Citi's Lava Trading division.

Lava saw its profile rise with NYFIX's departure. The electronic trading division of the big bank is taking over NYFIX's 16 accounts, which will discard Fusion and install the Lava ColorPalette order management system. That brings the total number of firms using ColorPalette to about 50.

SunGard boasts about 70 market makers on its Brass system, or about half the total number of Brass customers. The U.K.-headquartered Fidessa says about 60 percent of its 60 North American sellside OMS customers are market makers.

The Players

The true measure of an OMS vendor's market presence, though, is the number of people using its system. Based on that, the business is dominated by SunGard and Fidessa, which have installations at the largest firms.

Before the NYFIX deal, ColorPalette was used by 1,000 traders at 35 firms. Neither Citi nor NYFIX execs could say how many Fusion users there were, but estimated that the 16 trading desks averaged between six and 50 traders. Fidessa says it has 4,000 end users in the U.S.; SunGard won't say.

NYFIX, which will cease supporting Fusion, steered its customers to the Lava system because of the similarities between the two systems, says Chris Walsh, head of NYFIX's OMS division. NYFIX customers were also in favor of the move, he adds.

As for price, Keith Jamaitis, Citi's director of ColorPalette product management, says new Fusion users should not experience any sticker shock. They might even get "incentives to upgrade sooner than later," he notes.

As part of the deal, Citi agreed to build into ColorPalette access to certain NYFIX services the Fusion users previously got. Those include NYFIX Marketplace, its connectivity service; the firm's NEXAS algorithms; and its alternative trading system NYFIX Millennium. That arrangement is renewable periodically, Jamaitis says.

NYFIX entered the market-maker segment of the sellside order management system business in 2002 when it invested in a company called Renaissance Trading Technologies. The system it got, a Nasdaq market-making OMS then known as Platinum, was meant to complement NYFIX's strengths in NYSE-listed order management.

Business went well at first as the newcomer grabbed customers from Brass, sources say, but hit a wall when customers began asking for full depth-of-book access to markets. Previously, the NYFIX had been offering just top-of-book access.

Building an infrastructure to support full depth-of-book access is expensive, as all the different marketplaces must be reachable. NYFIX did not want to devote the resources for such an endeavor, sources close to the firm say.

What Price Increase?