A Conversation with Nick Davidge
WST: So how will this be different?
Nick Davidge: Historically we haven't interfaced with the market data vendors or the back-office vendors from our data centers. We've always said, ""Okay Mr. Customer, whomever you've got for back- office systems and market data, stick that in your own data center or put a line into our data center. We haven't made it part of our network, as you will.""
WST: Will Global ICE help S1 further its retail consumer financial services business?
Nick Davidge: As we're moving aggressively into signing up FSIs to provide consumer facing online brokerage, as part of this integrated consumer suite, one of our real challenges is to reduce the time to market. Let's say we sign up a customer—a FSI that's self clearing through Sungard Phase3 and uses S&P ComStock for market data and wants to have control of their order routing world. Rather than say, ""Let's put a line into Sungard and let's put a line into S&P and let's put lines into exchanges and let's start testing it all,"" we want to say ""Here's a common API and all those interfaces are already in place in the S1 data centers, and the S 1product already knows how to talk to that API."" So instead of having to wait while we install all those back-end services and test them and figure out what all those message formats and all the business processing rules are and spend four to six months doing it we've got everything in place and we can implement the whole thing in four to six weeks. It's going to take time to build that out. But our objective is to have hosted interfaces to all the clearance, execution and market data systems globally.
WST: Is the Global ICE infrastructure going to help S1 become a major player in straight-through processing?
Nick Davidge: That's it, because there are two goals there, and having the product set fulfills both of them. It fulfills our goals to get our online brokerage product to market more quickly and more effectively. And it addresses the institutional segment of the market where the historical Davidge business has been. We have received a charter from S1 management to grow that segment very quickly and to globalize. It will allow us to be a major player in straight-through processing. I'm still working hard on evolving the strategy.
WST: How long will it take?
Nick Davidge: I fully expect in three years that S1 will have global connectivity with all securities processing and clearing firms and with all exchanges in the world, maybe through our partners using things like the existing Davidge relationship with Versus Technologies in Canada and GL Trade in Europe. We share order routing clients and we already have joint customers with both of those companies. We also share order-routing and clearing destinations with both of those companies in different geographical areas.
WST: What makes this possible?
Nick Davidge: The key thing from a technology perspective is that we're going to have a single API that everybody can use to gain access to all the clearance execution and market systems and we're working with partners. And much of this gets down to what we now call: hosted EAI for enterprise application integration. This is exactly where companies like IXnet are going. They started as basically secure private financial transaction networks and now they're moving upstream in terms of adding applications ... IXnet has some sort of FIX engine. They'll basically license you FIX services and network.
WST: How will you differentiate your offering from theirs?
Nick Davidge: We plan to go a step much beyond that because we're going to offer hosted message-oriented middleware into all of these different execution, clearance and market data systems. So it just won't be data communications, it'll be data comm plus EAI .... This whole EAI world is fraught with difficulties. because of the fact that vendors are trying to denormalize the standards. The standard i.e. Corba may be deficient in many ways, like it may not offer good monitoring or it may not offer a GUI to do message transformation. Or it may not offer a reliable message delivery queing mechanism. So that's where the Tibcos, the Neons, and the STCs and the rest of that gang ... BEA, they all come in there with their little slant on what's good about their solution It's not unusual to see markets evolve that way. The vendors work aggressively to defeat the standards. The same thing has been true in order routing standards. Everybody tries to make their own version of FIX which is incompatible with everybody else's.
WST: How will you go beyond what's already being offered?
Nick Davidge: We're going to put our applications on top of these global financial networks and provide the key-value added interface. The FIX engine on an IXnet is a commodity now but when you take FIX in and go to the Paris Bourse clearing interface, or if you take FIX in and go to ADP for post-trade or go to NSCC or go to a different flavor of FIX to deliver to Archipelago—and you wrap EAI via queing, monitoring and graphical message transformation on top of that and offer it globally, well, then you really got something. That's the Holy Grail... That'll take me to the end of my career. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio
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