First there were 12, then seven, four and finally one. As Hermes Pensions Management (50 billion sterling under management) recently discovered, selecting the right trade order management system is an arduous process, which requires much time and serious effort. With T+1 on the horizon, Ingrid Kirby, head of index matching and sponsor of the project to select a trade order management system for Hermes, says that handing pieces of paper to the deal entry department was no longer going to cut it. First step, says Kirby, was to identify a long list of suppliers through asking other firms what they were using and reading the trade press. Just to make sure they didn't miss any names, Kirby says Hermes took their case to the Internet and did a basic search to finally come up with an initial list of 12.

"With some of those it became clear they didn't have the breadth of what we needed, so we ended up with a second list where we actually asked them to demonstrate their products and fill in an initial response for information," she says. That list containing seven names was narrowed down to four, who were asked to respond to a detailed request for proposal (RFP) which Kirby describes as being more work flow based.

The final four companies were MacGregor, Argenesis (Longview), SS&C, and Charles River Development.

Kirby says the next step was checking references, specifically any vendors who had clients in the United Kingdom where Hermes is based. "When it came to the final evaluation, it certainly counted in MacGregor's favor that they had an effectively proven product in the U.K. market, so we had a better idea of how their business related to ours," she says.

Hermes needed an offering that could handle a broad range of functionality, says Kirby, such as portfolio modeling, pre-trade compliance, full order management including fixed-income electronic trading capability and the need that everything be integrated into Hermes' existing back office. In terms of financial instruments, the system was required to support global equities, bonds, and derivatives.

The decision to go with the MacGregor Financial Trading Platform (MFTP)-an enhanced version of the Merrin trading platform-was based, according to Kirby, on MacGregor's presence in the U.K., advantage in fixed-income capabilities, and proven technology.

President and CEO of the MacGregor Group Steven Levy says U.K. companies can easily see MacGregor's commitment to the region in the company's actions. "They know we're not going anywhere," he says, "we have been there (U.K.) for over three years and we are investing in our staff and expanding our network, they see that."

Levy says it's about being comfortable that a vendor can give firms the support they need, when they need it. If a problem arises in the U.K. when everyone at a U.S. technology firm has gone home for the night, what is an asset manager going to do? What if the U.S. vendor can't get personnel to the U.K. in time for a major fix?

As for fixed income, Levy explains that the MFTP can handle many types of advanced requests. "You can specify, 'I'm not sure which bond I want but I want a bond that has a seven year maturity and an 8.5 percent coupon,' the system will then allow them to be purchased as a bond matching that criteria becomes available," he says.

Hermes is currently analyzing workflows to identify areas where traffic will have to be rerouted. The effort is substantial because the system must be integrated with Hermes' back office which will take some time. When the platform goes live in the fourth quarter, Hermes expects to process trades more efficiently than ever before.

"If you have a system that is tracking orders rather than relying on bits of paper and re-keying, your error rates go down," Kirby adds, "that means you have less settlement and confirmation failures and there are savings associated with that."