In the world of execution and clearing, where the fastest technology often determines the winners and losers, Newedge USA is so concerned about the quality and capacity of its software that it has hired forensic analytics specialists to go deep inside its systems and improve the underlying processes. "We're going inside the brain of the processes of the platform to see if there is a better way we can make it think," explains Stephen Davy, chief information officer at Newedge USA, which is part of a global joint venture formed in 2008 by two of Europe's largest financial services providers, Credit Agricole and Societe Generale.
The forensic analytics initiative is one of the brokerage firm's top IT priorities for the year, says Davy, who oversees the technological support of Newedge's sales and customer service activities, as well as Newedge USA's IT strategy, project oversight, team leadership and development, and service. As a major player in the listed futures and other markets, Newedge has "millions of transactions to process for its clients," he notes, adding, "That information then goes downstream to the firm's risk systems and client reporting systems, day in and day out."
Given the critical role of efficient technology in today's markets, rather than wait for the technology to advance, Davy says, Newedge hired specialists to perform relationship analysis on its systems and recommend improvements. And the results have been revealing. For example, "We discovered that a process that runs inside the system has an effect on other processes in the system," Davy shares. "That is where in-depth analytics are eye opening."
Today, Davy notes, Newedge is focused on its clearing systems -- platforms that he says are a core competency but that also can be a differentiator when account executives are out selling the firm's services. "At the end of the day, a lot of what our salespeople are selling are the capabilities our technology platforms provide," Davy insists. "When I've got a salesperson going on a client visit and someone on my staff is going with them to explain our technology capabilities," he adds, "that's a great partnership."
Davy points to the company's "virtual data broker" as a top priority. Currently under development, the solution, which is based on Java and VMware technology, sits on top of Newedge's platforms, creating a universal data mechanism for clients. As the firm takes in information from exchanges and processes that information for clearing purposes, Davy explains, "The virtual data broker sits on top of our platforms -- almost like a railroad switch -- for listed derivatives or OTC, equities or foreign exchange, so that we have a common platform on which our data can flow."
Dodd-Frank also is at the top of Davy's agenda, both in terms of compliance and business opportunity. As OTC derivatives move toward central clearing, he acknowledges that Newedge is implementing a new platform to comply with the requirement. The company also has launched central counterparty clearing of interest rate swaps.
Another IT priority is enhancing the reporting capabilities of Newedge's client portal. The goal is to enable clients to initiate their own reports via a graphical user interface (GUI), without writing code. "Putting more power in the user's hand is the goal," Davy notes. "That's key for us, as well as providing more transactional capabilities."
To support the business units engaged in various asset classes, Newedge has created small technology teams to work with each of them, according to Davy. The brokerage business includes equities, foreign exchange, fixed income and commodities, "So we have small teams that are the front end to the various business lines, and behind that we have our core capabilities -- clearing and execution systems and our client portal capabilities," he says. "And underneath that is our technical support for databases, operating systems or networks." The front-end teams, which comprise five to 10 IT professionals, speak the business lines' language, helping drive business goals and innovation, Davy adds.
When Davy joined the firm in early 2009 as its first official CIO, Newedge was still completing the process of merging the two large brokerage houses, Calyon Financial and Fimat, that were combined to form the joint venture. "One of the things we've focused on was integration and simplification," says Davy. "We doubled system capacity and the number of processing systems -- it was a huge effort in terms of integration. As it evolved, the architecture that existed in 2009 -- whether it was a finance function, securities, foreign exchange or futures business -- it's a much simpler application architecture today."
Oracle, VMware, SunGard and IBM are among the firm's key technology partners. And in July, Newedge announced that it had selected Fidessa's trading platform and order management system for the brokerage's global derivatives and equity trading business.