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March 9, 2009

NYFIX Adds a Page to Its Playbook

By James Ramage

NYFIX is enhancing its indications-of-interest business with the debut of its second desktop IOI tool.

The firm hopes its new tool-called NYFIX ioinet-will help buyside firms find block liquidity by adding a front-end product to its original IOI service, which focused on OMS integration. NYFIX wants the new IOI service to round out its offering to its clients, which use its order-routing, crossing network, as well as algorithm and DMA strategies.

Offerings aside, its primary challenge remains to loosen Bloomberg and AutEx's stranglehold on the IOI space. And though competitors say this will be a tall order, NYFIX is confident.

"We think we've done something that's a little bit above and beyond what [Bloomberg and AutEx] have been able to accomplish," said Bob Moitoso, global head of the firm's FIX division. "We think we've raised the bar, once again, on features and functionality."

Almost a year ago, NYFIX bought the U.K.-based technology firm Fixcity for about $6.6 million in cash. The firm fused Fixcity's ioinet product to its own upgraded 2006 IOI offering. It then recently integrated the new IOI service into its NYFIX Marketplace of trading counterparties and launched the service this month.

Fixcity gave NYFIX about 70 "cream of the crop" European buyside customers, Moitoso said. NYFIX also added about 80 European sellside customers, he said.

In all, the NYFIX Marketplace has more than 400 buyside institutions and about 600 broker-dealers, Moitoso said. Of those, almost 200 institutions and about 130 brokers are U.S.-based users of NYFIX's IOI service, he estimated.

But beyond customers, Fixcity gave NYFIX genuine IOI know-how, said Marshall Caro, founder of Indii, a competitor in the IOI space. Before the acquisition, NYFIX "really didn't have the software to adequately display IOIs in a useful way for customers," he said.

NYFIX's ioinet is an Internet-based application that acts as a repository for broker IOIs, advertised trades and accompanying analytics, Moitoso said. The tool displays the IOIs on the buyside's OMS, as well as on ioinet's front end, said Paul Scott, global head of NYFIX's IOI business. Participating NYFIX Marketplace brokers can target specific institutions with their indications, Moitoso said.

IOI systems typically send one message out to a broad scope of institutions, he said. As a result, the message quality gets diluted. NYFIX ioinet creates a one-to-one communication from the sellside and the buyside.

"The buyside needs to permit the sellside to send them messages; it's on a per-relationship basis," Moitoso said. "So, the broker is entitled to send messages to that institution. And that heightens the quality of the message, because both the broker and the institution are expected to communicate over this medium."

Thomson Reuters' and AutEx's IOI services already do this, and more, said Tom Venezia, global head of exchange traded transactions at Thomson Reuters, a majority shareholder of Tradeweb, which owns AutEx. Their services can target indications to specific buyside firms or block other institutions from receiving certain IOIs, he said.

Still, Venezia added that there is room in the IOI space to grab market share from AutEx and Bloomberg. But potential customers must first determine how comfortable they are with their existing systems.

"I would say that, for the most part, traders hate change," Venezia said. "And if it's working for them now, then they're not likely to make a change anytime in the near future."

One potential buyside customer, who declined to be identified, said he liked the idea of a tool that can target specific institutions' blotters with IOIs, as ioinet can. He also said he likes to receive IOIs through the OMS.

His firm already uses Bloomberg to get broker indications, and also has a service that sends IOIs to his desktop. Echoing others, he said that penetrating Bloomberg's space would be a challenge.

"I think the difficulty in competing with Bloomberg is they're already on your desktop," he said. "If you're using Bloomberg as your quote service, there's no need to bring in some other product."

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