The origin of the major M&A activity on Wall Street can be traced back to the high-profile collapse of Bear Stearns in early 2008. Its subsequent fire sale to J.P. Morgan signaled the beginning of serious financial turmoil across the markets. The two firms have been working to integrate their electronic offerings for more than a year, and the efforts are starting to show results.
"From the moment the Bear Stearns merger was announced, we began to drive a process of picking best-of-breed system resources and human talent, regardless of which firm they came from," says David Conner, managing director and head of electronic client solutions (ECS) group distribution, Americas, at J.P. Morgan. "The J.P. Morgan ECS group has been operating as a single entity since last year, focusing on two key disciplines: distribution and product."
Conner, who was with J.P. Morgan before the acquisition, acknowledges that, as expected, there were some challenges along the way. "For example, even though the merger of Bear Stearns with J.P. Morgan closed in June, we had to run separate electronic trading desks until the broker-dealers were merged in October," he relates. "After that, we were allowed to combine our distribution teams of sales, on-boarding [clients] and anonymous servicing into one."
Today, Conner explains, the unified ECS distribution team for the Americas is housed at the firm's offices at 383 Madison Avenue in New York. The team has a strategic global vision for its ECS disciplines covering algorithms, analytics, liquidity, portals and connectivity, he notes.
On the algorithm side, Conner relates, "Knowing that it was impractical to support multiple platforms to run and build our algorithmic suite, we realized early on we needed to consolidate. After a detailed analysis -- taking into account performance, ability to service and ease of technology integration -- we chose to retire Bear's EAST suite of algos and continue to deploy J.P. Morgan's algo suite."
He adds that during the rationalization process the team was able to identify a number of attributes in the Bear algorithms that are now being incorporated into the firm's next-generation algorithmic platform. "This next-generation algorithmic offering will be deployed globally and will combine best-of-breed functionality from both platforms," according to Conner. "We plan to seamlessly move our customers to the new platform later this year or in the first quarter of 2010."
J.P. Morgan also has plans to launch its new dark pool later this summer or in early fall. But first, Conner points out, the firm had to undertake a major initiative to consolidate all equity order flow into a single location and merge the back- and middle-office functions. "With the completion of these activities, we will soon have hundreds of millions of J.P. Morgan shares a day passing through our proprietary smart order router and both posting to and scraping our dark pool," he says, adding that while the team has been hard at work building the new dark pool, he cannot reveal the venue's name just yet.
As far as trading platforms go, according to Conner, J.P. Morgan will continue to leverage its Neovest broker-neutral electronic execution platform, which was purchased by the firm in 2005, for its institutional clients while internally it continues to leverage a proprietary system. "Neovest gives our prime brokerage customers much more trading power over their previously installed Bear Trade system, including access to global markets, our integrated algos and smart order routing strategies, pre- and post-trade analytics, as well as a single platform to trade, allocate and report with multiple brokers," he contends.