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February 16, 2009

Weeding out the Noise

Blotter-scraping technology expands to research

By James Ramage

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Sales traders can be forgiven for being a little nervous. It's no secret that new technology has evolved and spread over the past few years, encroaching on their turf. This entails not just technology the buyside has used for more self-directed trading, but also the growing research management space. Firms such as Trade Ideas Limited, First Coverage, FactSet, Bloomberg, FirstRain and several others have been developing more powerful tools to help the buyside filter through the barrage of research, trading ideas and other information it receives daily.

Its never-ending quest is to weed out the "noise" from the relevant. In the process, research management technology has started to automate something sales traders have done for years: sharing market color and trading ideas with their accounts.

This is where InfoExchange steps into the picture. The firm is one of the latest to create a research management solution.

Established in 2007, InfoEx launched its latest version in October. Founded by a team with a background in electronic trading and matching engines, InfoEx uses a smart-routing technology to connect the buyside to the most germane sellside research, trading ideas and color.

InfoEx chief executive Dean Stamos co-founded NYFIX Millennium, one of the first listed ATSs that was based on a blind matching box, Stamos says. He and InfoEx co-founder and operations chief Chris Stangel worked together in algo trading at OptiMark.

Be Proactive

The two saw a need and decided to combine matching-engine and algo technology to do something besides just putting up trades and joining buyers and sellers. Instead, they wanted to match information to trading, Stamos says.

"We wanted to create a system that lets the buyside do nothing, no implementation," Stamos says. "The goal is to be proactive about the information: The information is supposed to find you, as opposed to you going to look for it."

The buyside says it appreciates anything that helps it manage the daily bombardment of information that crowds its desks. But it also still values relationships that deliver information and research.

"It's about the personal touch," says Joe Burrello, director of global trading at IronBridge Capital Management, in Oakbrook Terrace, Ill. "[Sales traders] understand your needs better than a computer. The people I trade with, they have an understanding of what IronBridge is, how we operate, what we're looking for."

InfoEx tries to master all those things, as well, Stamos says. But it also gives boutique sellside firms--or those trying to make a name for themselves without a sales force--the opportunity to get noticed.

Targeting Information

To match buyside clients with sellside ideas, InfoEx builds a profile of its buyside clients' trading habits. InfoEx uses a real-time feed of the buyside's trading activity-through FIX drop copy from the buyside firm's order management system.

"The important part of the blind box is that nobody can see copies of your trading activity," Stamos says. "The system sees your trading activity, not any human eyes, much like trade cost analysis would."