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A Smarter Monkey

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September 1, 2010

SunGard Buys Fox River For Algos

By James Ramage

SunGard made a name for itself building order management systems for brokers. But its latest acquisition highlights how its priorities lie with the buyside.

Ronald Santella

In late July SunGard announced its acquisition of Fox River Execution, a broker-dealer and algorithm developer. In doing so, SunGard adds algorithms to its growing list of services targeted at traditional money managers and hedge funds. They include market connectivity; a multi-asset, multiregional execution management system; an internalization engine; and clearing and compliance sweeps, said Raj Mahajan, president of trading at SunGard.

"We've been good with the OMS-infrastructure and market-center connectivity, the core guts of it," Mahajan said. "We needed to have the higher-end, value-added services, more of the algo trading part."

Formerly, SunGard offered its buyside customers algos on a white-label basis with anonymous partners. As they are one of the fastest-growing areas of its strategy, SunGard saw enough to justify a significant bet in algorithms. And the Geneva, Ill.-based Fox River made a good fit, Mahajan said.

"[Fox River has] demonstrated a real agility in the industry around identifying new types of products and building new, sophisticated algorithms," he said.

SunGard gives Fox River the scale and resources to reach more clients with enhanced products and services, said Ronald Santella, who will continue to lead Fox River's management team. SunGard would not disclose details of the acquisition.

With fewer brokers these days, the market for order management systems on the sellside has been shrinking. SunGard recognized that it had to expand its business model beyond the sellside OMS business. Over the past 18 to 24 months, the firm has been beefing up the products and services for its brokerage business.

SunGard Global Network, its FIX network to connect to brokerages, comprises more than 1,800 buyside firms. SunGard sees this network as a foothold into the buyside and believes it can increase its business with these clients by selling them its new algorithms.

Given SunGard's business model, the Fox River purchase made sense, said Sang Lee, a managing partner at the consultancy Aite Group. Algorithms were an important component that SunGard hadn't been able to offer its clients, he said.

"[Fox River] seems pretty well regarded; it doesn't seem like a 'me too' type of service," Lee said. "It will certainly help [SunGard] get to that next level."

A competitor of SunGard's in the EMS space said the firm's acquisition was a smart one. Fox River is a cost-efficient way to bring algo expertise in-house without having to start from scratch. But SunGard's true test remains, he said.

"SunGard has always been a hodgepodge of different technologies here and there," Aite Group's Lee said, "and their greatest challenge has always been--and continues to be--integrating those various products."

 

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