Buyside order management king Macgregor is betting its new platform will cure its schizophrenia.
The system – Macgregor XIP – is both an upgrade and a rebranding of the Macgregor Financial Trading Platform (MFTP). But, more importantly, it is a replacement for Predator, MFTP's sister product. After struggling for the past two years to support two order management systems, Macgregor hopes to migrate Predator users off Predator and onto XIP.
In addition to simplifying its own life, Macgregor expects the move to mollify some upset customers. Many feel Macgregor has abandoned them to devote itself to the larger group of MFTP customers.
Ever since Macgregor bought its larger competitor, Merrin Financial, in May 1999, it has been responsible for two distinct order management platforms. MFTP, then known as the Merrin Financial Trading Platform, is the industry leader with 51 installations. Predator, Macgregor's creation, has 22.
Despite assurances by Macgregor at the time that it would incorporate the best of both systems into each other, the traffic has been mostly one-way. MFTP users got Predator's well-regarded connectivity capabilities, for example, while Predator users were left with an outdated database.
Macgregor CEO Steve Levy denies the firm has neglected its Predator customers, pointing to the recent release of version 2.3 as an example of its "extensive" support. Still, he does acknowledge Macgregor has stopped marketing Predator.
Levy admits Macgregor has not been able to meet all of the demands of its Predator customer base, but pledges the wait for XIP will be worth it. "We took a very deliberate approach," Levy said. "We wanted to make sure we understood every aspect of how our customers would be using the new system before we started providing the migration path."
Although version 1.0 of XIP will roll out early in 2002, Predator users will not receive the necessary migration tools until the release of version 1.1 in the third quarter. And because of the long lead-time involved in any large systems switch, it will likely be years until the last Predator user converts. Some may never. Version 2.0, due out in early 2003, will mark the end of the upgrade process.
Predator users generally applaud Macgregor's move. "We see it as a positive," said Mike Thorfinnson, COO and CFO at Toronto's TD Asset Management. "But it is something we have expected for some time." Thorfinnson is encouraged by MFTP's better "underpinnings" – specifically its database – and its fixed income capabilties.
A consultant agrees. "Steve is finally moving the user base forward," said John Clark, a principal at Cutter Associates of Duxbury, Mass. "It's the right thing to do." A consultant's stamp of approval is critical for small software vendors as buyside traders and their technologists often lack the time or resources to properly evaluate all of the offerings.
Cutter does in-depth product research and evaluation for 40 money management firms in its consortium, the Technology Council. It has consulted on about 25 installations of order management systems in the past three years.
Macgregor is both the oldest and the largest vendor of technology that lets buyside traders keep track of orders and interface with brokers and markets. Granddaddy MFTP has been on the market since 1987; Predator, since 1994. Revenues are forecast at about $30 million this year.
OMS Upstarts
But Macgregor faces intense competition from a slew of upstarts. Eight – Eze Castle, Longview, Charles River, Decalog, Indata, Advent, SS&C, and Thomson Financial – have debuted technology in the past four years.
Macgregor has felt the heat. At the time of the Merrin acquisition, it boasted 80 customers, equal to a 50 percent market share. That figure is now 73. Three Predator and five or seven MFTP users have opted for other systems, says Levy. Others have disappeared in the wave of consolidation that has hit the money management industry in recent years.
While the vast majority of Predator users have stuck, they are not a happy bunch. "I have nothing positive to say, so I will say nothing," seethed one user. At the heart of their discontent is Macgregor's decision to focus its limited resources on MFTP.
Levy says it was a straightforward decision: "When we looked at what the market was asking us for, it was easier to take MFTP as a starting point and modify its technology in an evolutionary fashion than to start with Predator."
Much of what the market is asking for, according to Levy, is a single system to manage both fixed income and equity orders. MFTP has always been a multi-instrument system. In addition to equities, it can handle fixed income and money market paper. Predator only handles equities. "Customers are looking for characteristics that will ultimately cause them to move in the direction of MFTP," Levy said.
Another factor in MFTP's favor was its database. MFTP incorporates a relational database that is more scalable and more easily customizable by a money manager's technical staff. Predator relies on an object-oriented database that is cumbersome to work with and requires the help of Macgregor personnel to make changes. Predator users have often found themselves waiting in a long line at the Macgregor help desk for help that never comes.
UBS Asset Management spent time in that queue. "We wanted to be able to do a lot more internally in order to customize it because we had found a fairly slow response time from Macgregor," said global head trader Paul Harvey. "They were very attentive, but attentive does not get the project complete."
More than half of Macgregor's Predator users have requested a relational database, according to Levy. But, he says, incorporation of one is neither financially nor technically feasible.
Focusing on MFTP meant Macgregor initially had to rob Peter to pay Paul. MFTP had been neglected by its previous owner, ADP, and was considered antiquated, observers say. "To beef it up," said Thorfinnson, "they partly needed the resources devoted to servicing Predator clients."
Communication has been another sore spot. Customers accuse Macgregor of failing to articulate a development strategy. UBS, which has added to the number of its trading desks worldwide because of mergers, began to mull a new OMS strategy 18 months ago. "When we started this process there wasn't a lot of clarity about where Macgregor was going with either of its products," Harvey said. Confusion over Macgregor's strategic direction led UBS to switch to the Longview 2000 platform.
Harvey adds though that Predator served his firm well when it was just trading U.S. equities. UBS was an early Macgregor customer in 1994.
Levy admits Macgregor has not always gotten the word out. "There may not have been as much visibility into the work we're doing," he said. But he adds the entire buyside OMS industry has struggled to meet client expectations. "It is seen as relatively small, doing the best it can, under-capitalized, under-staffed and continuously coming up against complaints about not enough documentation and poor quality," he said.
Partly to remedy its customer service problem, Macgregor raised $32 million in a private funding in August 2000. Since that time it has nearly doubled the size of its help desk to 18 and staffed it with more knowledgeable professionals. It has also created a group within the company that does product training. "We are constantly trying to make the consultants and the help desk more familiar with the product," said Levy.
Other monies from the financing went into its sales efforts and product development. "The majority of the capital infusion has gone into MFTP," said Clark, noting that much of that went into improving MFTP's fixed income capabilities.
Levy will not discuss the specifics of the XIP upgrade, only noting that Macgregor is "trying to advance our state of technology."
He says XIP will be more scalable, better performing and include a more modern graphical user interface (GUI, or display). Improvements to MFTP's fixed income and money markets trading will "work more off of holdings." Finally, it will further strengthen MFTP's connectivity abilities by bringing over the superior front-end functionality of Predator.
"By the time 2.0 comes out," Levy said, "we will be talking about the kind of product the industry has not yet seen."
