Latin American Security Depository Selects ePit for Trading Systems

In preparation for its pending launch of a trio of trading systems in Brazil, Central of Custody and Financial Settlement of Securities (Cetip)--the largest custody and financial clearinghouse in Latin America--has sign a licensing deal to use ePit Systems' Enterprise Exchange Server (EES). Cetip plans to roll out its new EES-driven trading systems in place of its incumbent, mainframe-based trading systems.

Rogerio Martins, director of business development at the Rio de Janeiro-based Cetip, says that EES will serve as the hub of a pair of auction systems--one covering mortgage-backed securities and another covering treasury securities--the firm plans to launch in the near future. What's more, he says, EES will also be the driving force behind a new online trading system that will allow Cetip participants to electronically trade any security registered with Cetip.

Cetip expects to have all three systems up and running by the end of the year--starting with the auction system for mortgage-backed securities in September. Eventually, the systems will replace Cetip's legacy, mainframe-based systems--platforms Martin describes as "not very user-friendly."

A source familiar with Cetip's evaluation process says the finalists for the trading systems contract were San Francisco-based ePit and New York City-based eSpeed Inc. The source also says that Cetip signed a "multi-million dollar perpetual licensing agreement" for EES.

Martins acknowledges that eSpeed was in the hunt, but declines to say whether eSpeed finished as the runner up to ePit. Cetip, says Martins, selected ePit only after a yearlong search in which it evaluated several trading systems vendors in both the U.S. and Europe. The main reason ePit came out on top, he says, is because of the open architecture of EES.

Cetip, Martins explains, wanted to buy a system that it could easily customize to meet the needs of its clients. "ePit does not sell you a standard trading system; rather, they sell you the core of the trading system.... and that allows you to set up a trading system whichever way you want," he says. "Once we buy ePit's system, we don't have to depend on ePit or on anybody else to design new trading systems or to change whatever we design .... Our people have been trained by ePit, and now we can design our own systems using their platform."

Unlike other systems Cetip evaluated, ePit's EES will allow the firm's internal IT staff to implement changes on the fly, enabling quicker time to market. That's important, Martins says, because the Brazilian securities market is complex, and it would be "nearly impossible" for Cetip to run every system change it had to make by its U.S.-based technology supplier.

Cetip was also impressed with the ability of EES to electronically interface with all of the firm's other internal applications--including its risk system and its clearing system.

Martins says that Cetip is primarily a "central security depository for fixed-income securities." Cetip, he says, has two types of participants: member banks and brokerages and non-member institutions. Combined, Cetip currently has roughly 3,500 participants.

Tim Campbell, president of ePit, says that the deal with Cetip is a sign of things to come. "Going forward, we believe our clients are going to be looking for the ability to trade all assets, all different ways, on a single platform--and that's what we provide," he says.