SunGard made a name for itself building order management systems for brokers. But its latest acquisition highlights how its priorities lie with the buyside.
Last Thursday, SunGard announced its acquisition of Fox River Execution, broker-dealer and algorithm developer. In doing so, it now adds algorithms to the growing list of services targeted at traditional money managers and hedge funds. They include market connectivity; a multi-asset, multi-regional execution management system; an internalization engine; clearing and compliance sweeps, according to 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 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, according to Sang Lee, a managing partner at the consultancy Aite Group. Algorithms were an important component SunGard was missing, 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 hodge-podge of different technologies here and there," he said, "and their greatest challenge has always been–and continues to be–integrating those various products."
