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In all the talk about e-trading, one important question has been
overlooked. What will institutional investors do next year when
they’re confronted with a dozen or two bank trading sites,
competing bank consortia organized around particular asset classes,
and specialized independent alternative-trading-system dot-coms?
Philippe
Buhannic, CEO of New York-based TradingScreen, thinks
he has the answer. Buhannic, who joined the firm in
June, is putting the final touches on a multidealer,
multiplatform electronic order-routing system that will
ultimately cover listed and over-the-counter derivatives,
equities, foreign exchange and U.S. Treasury bonds—all
on a single screen.
“The institutional customer is already facing a geographical
fragmentation and a product fragmentation,” says Buhannic.
“Now there’s a technical fragmentation as well, with many
different trading icons on his desktop. Over time, customers will
be incapable of managing 100 platforms because the liquidity will
be split. They want a one-pipe application.”
TradingScreen will be just that, providing clients access to all
markets, across all asset classes—including the listed derivatives
exchanges—in one single Internet platform.
But TradingScreen isn’t a soup-to-nuts trade-distribution
system—it’s simply an electronic crossing engine that
serves as a lingua franca between other electronic exchanges. Rather
than clearing trades, for instance, TradingScreen links to a number
of outside clearing firms, sending settlement information back and
forth between counterparties and the clearers.
The company, which expects to have 30 employees by the end of the
year, raised some $6 million in August in a private round of financing.
It plans to launch sometime in December.
Buhannic got the idea for his new company during his work at Credit
Suisse First Boston. While at CSFB, he and his team developed that
company’s groundbreaking PrimeWorld system, which includes
PrimeTrade, an Internet-based order-routing and execution system;
PrimeClear, a trade-clearing system; and PrimeRisk, a risk management
system. But when PrimeWorld clients complained that the single dealer-client
system couldn’t link to other dealers like Goldman Sachs and
JP Morgan, Buhannic realized that electronic derivatives trading
had become too fragmented. The proliferation of electronic systems
around the world—from dealer-client systems like PrimeWorld
to Internet-capable derivatives exchanges like Eurex—has created
what Buhannic calls “icon glut”—that is, far too
many trading screens for players to deal with.
What’s the early word? “The reaction from customers and
dealers has been very positive,” Buhannic says. “Firms
have different issues. Some want a web platform for products they
don’t have. Others want a clearing platform or a channel to
provide their prime brokerage services. We provide them first-to-market
capability and customer connectivity services—and relatively
cheaply. They get a high-quality interface right away instead of
having to build their own.” Clients, on the other side, get
simplicity of access, one set of ergonomics and a high level of
straight-through processing.
In these early days of web-based trading, Buhannic’s long-term
goals are ambitious: “We want to enable electronic execution
for a wide variety of products and boil it down to a limited number
of models, to build a database that can handle all these aspects,
and to build a robust, error-free system that can be deployed on
a world-wide basis.”
It’s clear that consolidation in the e-derivatives markets
is necessary, and inevitable. Will TradingScreen be able to pull
it off? |
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