Apogean Technology Inc. and IBM this week launched a B2B Alternative Trading System (ATS) that will serve as a marketplace for institutional dealers to trade Brady bonds and sovereign debt.
Apogean initially hoped to build its trading platform in-house but after a few months of planning made the decision in September of 1999 to buy rather than build. IBM had already built its first bond integrated trading system (ITS) in 1990 for the Italian government to automate the trading of government debt, and has continually upgraded and maintained that system over the past 10 years. According to Linda Zetterstrand of Information Systems Management Corp., a wholly owned subsidiary of IBM Canada Ltd., readying that system for Apogean's needs required only "minor modifications."
Michael Campbell, Apogean's chief information officer, says, "We immediately looked at IBM because they had a bond exchange running in Europe for over five years." According to Robert Hedges, chief executive officer of Apogean Technology, IBM was one of only two companies in the world that could have provided his business with the system it wanted. He declined to name the other company but described the trading platform provided by IBM as "secure, institutional order-routing management supported by reliable infrastructure."
The ATS is powered by IBM's ITS applications software for screen-based trading and runs on clusters of RS/6000 H70 servers. The ATS is hosted at the IBM Toronto data center, which monitors the systems performance, security and capacity management.
Hedges says Apogean chose IBM's operating system because it enabled Apogean to launch the exchange quickly, and it felt clients would trust a system bearing the IBM logo. "Going to IBM now makes it very tough on our competition," adds Hedges. He listed inter-broker dealers in general and eSpeed specifically as Apogean's competition. Additional considerations, says Hedges, were IBM's application delivery, data hosting center, and the knowledge that IBM would remain involved to monitor and troubleshoot the system.
Elaine Sullivan, global financial markets executive, agrees with Hedges. "One of the key issues today is time to market: to pull in the best partners to get the best solution in the shortest time," says Sullivan.
Hedges describes the intellectual genesis of Apogean taking place "over a few drinks at a Christmas party," and adds, "We saw that the whole of on-line trading had not impacted fixed income instruments at all. We realized we could stand up and do something about it or watch somebody else do it."
Apogean's new bond-trading market, or ATS, went live about two weeks ago with nine financial institutions that Hedges chose not to mention by name. Access to Apogean ATS is restricted to institutions that are members of the Emerging Markets Clearing Corporation (EMCC), and trading is available only on EMCC-eligible securities. He says two more institutions have been added since the network began operating, and he predicts the number of participants will not exceed 17.