In a surprise move, SunGard last month announced it intended to snap up 65 percent of GL Trade, the Paris-based financial services giant, for $625 million. The deal encompasses NYSE Euronext’s 40 percent stake in GL Trade, which the exchange operator decided to sell as part of a move to focus on its growing in-house technology and infrastructure services. SunGard expects to issue a tender offer for the remaining shares of GL Trade after its block acquisition is completed.
The deal could enable SunGard to catch up with Fidessa, its main rival among sellside order management system providers in the U.S. Both firms are currently in expansion mode, focusing on cross-asset-class trading across more geographies for their customers. Fidessa, a London-based company with 172 sellside customers and 10,000 users globally for its installed and hosted OMS product, is currently considered further along that path.
However, the SunGard deal, expected to close by the end of the year, could give the Brass OMS and execution business a big boost. “SunGard had to expand its offerings because more of the financial institutions using Brass were looking for global connectivity and exposure,” said Tom Price, a research director at research and advisory firm TowerGroup. “SunGard needed extensibility into the Europe and Asian markets to stay competitive.”
Brass, with more than 100 broker-dealer clients, is a powerhouse in the U.S., but hasn’t expanded overseas. GL Trade’s strength lies in Europe and is growing in Asia. The French company, whose revenues last year were 203 million euros, up from 185 million euros in 2006, earns most of that from its trading and OMS platform and execution-related services. Those services include GL Net, a vast order-routing and market data network that connects 700 financial institutions and 133 market centers and exchanges around the world, and an execution management system for the buyside.
Raj Mahajan, president of SunGard’s Brass business unit, acknowledges that Brass has been viewed as serving a U.S. cash-equities business. “We’re adding geographical reach and international capabilities to Brass customers, along with new instrument coverage such as options capabilities,” he said. SunGard’s MicroHedge, an options trading and analytics platform used by market makers and brokers, for example, is being integrated into Brass so customers can use the platforms together more efficiently. Mahajan declined to comment on the planned deal with GL Trade.
With Fidessa’s U.S. OMS business growing, Brass is also beefing up its domestic capabilities. One of Brass’ broader goals, Mahajan said, is to make their trading more efficient and less expensive across the trading life cycle. “We’re looking at every aspect of the life of a trade our broker-dealers execute, from what they do in the OMS to direct-market-access services, algorithms, how they access displayed and dark venues, how they clear the trade, and the compliance process,” Mahajan said. “We are trying to save firms money across that entire life cycle.” Brass early this past summer also rolled out a Liquidity Services suite of execution-related products, including smart routing and sponsored access through a broker-dealer subsidiary.
GL Trade, for its part, has focused on building out its European and Asian business. It tried to expand its OMS business to the U.S., as well, but didn’t gain significant traction. In 2007, 16 percent of the firm’s revenue came from the U.S. However, the company is confident about its products. In its May annual report, GL Trade said that “In equity markets, our systems are far ahead of competitors such as SunGard, Fidessa and Orc Software.” A GL Trade spokesperson said GL Trade and SunGard are focusing on the acquisition right now and “haven’t decided on a country-by-country, product-by-product road map following the acquisition.”
Fidessa declined to comment directly on the GL Trade deal. However, Martin Hakker, the company’s executive vice president of marketing, noted that Fidessa is continuing to build out its sellside OMS business by supporting trading in more asset classes and adding more advanced tools and analytics for program and pairs trading.
“Traditionally, our growth has been organic rather than through acquisition,” he said. “That leads to a more tightly integrated solution in the end.”
Fidessa is also responding to customers’ increased demand for international trading. Fidessa’s enterprise trading platform, used in-house by some of the biggest broker-dealers, supports cross-asset-class trading and has access to 94 exchanges globally. Later this year, Hakker said, Fidessa’s growing U.S.-hosted OMS will offer foreign-market trading. Currently, the hosted platform is used primarily within its users’ domestic market.
(c) 2008 Traders Magazine and SourceMedia, Inc. All Rights Reserved.
http://www.tradersmagazine.com http://www.sourcemedia.com/
