Programmers at Charles River Development, the Burlington-Mass. developer of order-management systems (OMS), are building an interface to TradeWeb--a leading electronic-communications network (ECN) for fixed-income trading-- that will permit buy-side customers to pass information back and forth electronically and receive back electronic confirmations and allocations in the post-trade environment.
This is also the first time that an OMS has been connected to a fixed-income ECN's application-programming interface (API) using messages based on the FIX protocol, contends Michael Hayes, director of business development for Charles River, who was first approached by TradeWeb about a year ago. The linkage is being described as a straight-through processing interface for the bond markets, because it encompasses the entire trade-cycle from front to back office, and it suggests that TradeWeb is stepping into a gap not yet filled by the promise of virtual-matching utilities (VMUs)--the defunct GSTPA and it's rival Omgeo.
By linking Chareles River's OMS to TradeWeb, buy-side institutions can do 'what if' analysis in Charles River's software to decide what they want to do. "Once you decide to do a fixed-income trade in the OMS part of our software, an order will go from (Charles River) via FIX messages to TradeWeb for executions," explains Hayes. Then the executions, (confirmations and allocations) can come back, he explains, without buy-side customers re-keying the post-trade notifications into multiple systems. "This is just to take the triple-entry out of the equation (and) get it down to one," comments Arnold Wachs, Charles River's product manager. The linkage is particularly attractive to buy-side institutions that use the Charles River Development OMS and pre-trade compliance software for fixed-income trades--including Putnam Investments and T. Rowe Price--cited in the news release. Both investment management firms trade extensively through TradeWeb.
"The concept is you enter the trade in Charles River and automatically pre-trade compliance is performed and then it's automatically executed, there's no chance for the trade to be re-keyed the second time in error," comments John Sadowski, manager of fixed-income operations at T. Rowe Price, who is eyeing the interface but says he has not yet seen a prototype or demo. The interface--slated for release in early 2003-- is being written to TradeWeb's TradeXpress API (application programming interface). TradeXpress is an extension of TradeWeb that provides the allocation and confirmation information back to dealers and down to investment managers and out to settlement agents, such as global custodians. It will take Charles River about two to three months to finish the interface, in part because they've chosen to use FIX messaging which has not been standardized for fixed income. "There's not a lot of FIX fixed-income messages shooting around the world today," says Hayes. Even though Charles River has a lot of experience with FIX messages on the equity side, adds Hayes: "the development effort here is specific to TradeWeb and specific to fixed income via FIX and that is a relatively new initiative," he says.
Although a draft version of the FIX 4.4 spec is due to be posted in February, final release is not expected until the second quarter of 2003. Because it could not wait that long to move ahead and take the lead, TradeWeb had to modify a previous version--FIX 4.2--"by adding a series of custom tags to carry some of the fixed income information that isn't otherwise carried (in 4.2)," explains Hayes.
There are two versions of the TradeXpress API-- a FIX version and an XML version. A spokesman claims that TradeWeb has had as much interest, if not more, in the XML version as in the FIX version. In fact, TradeWeb has over 250 investment managers using TradeXpress to allocate and confirm trades electronically with 10 dealers, and over 200,000 trades so far in the last six months have been allocated and confirmed using TradeExpress--in some cases, in as little as four seconds, he says. It added two dealers over the past two months, he notes.
In the long run, "the sweet spot," says Wachs, is that rather than use a proprietary API that was developed by TradeWeb, we're using FIX, an industry standard," which he believes will be used by other broker/dealers and investment managers as well as ECNs in the future." Though Charles River is committed to working with TradeWeb, which "definitely has the lead in implementation," says Wachs, "we anticipate that we'll receive demand to connect to other fixed-income ATSs (alternative trading systems) in the future," he adds. 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