MarketXT, the retail-oriented, after-hours equities trading system formerly known as Eclipse Trading, has hired IXnet to manage and maintain its network.
IXnet, the networking subsidiary of turret giant IPC Information Systems, edged out competition from AT&T and MCI Worldcom to snag the MarketXT contract.
Eugene Choe, chief operating officer of MarketXT, says that prior to selecting IXnet, the firm issued a request-for-proposal in which it specified its network management needs. MarketXT chose IXnet, he says, primarily because it met more of MarketXT's RFP criteria--especially with regard to price, services and "financial industry presence."
The decision to retain IXnet was also influenced by the fact that MarketXT did not want to be in the business of managing networks. "This is IXnet's whole business and we thought it was best to outsource network management to one of those providers," Choe says. "We run a trading system... that is offered to a number of Wall Street firms, and are connection to them is very critical."
MarketXT's brokerage clients include Morgan Stanley Dean Witter, Salomon Smith Barney (SSB), Herzog Heine Geduld, Bernard L. Madoff Investment Securities, Discover Brokerage and E-Dreyfus--the online trading arm of Dreyfus Securities. Morgan Stanley, SSB, Herzog and Bernard L. Madoff are also minority owners of MarketXT.
Choe says that MarketXT--which is also minority-owned by venture capitalist Polaris Venture Partners--is currently talking with other potential brokerage clients about its trading system. If any broker agrees to use the system, he says, MarketXT will then tell them to contact IXnet to order a communications line. "The line, through IXnet, gets installed at the brokerage house and in our back office. The purpose of that line is to ensure that the brokerage firm can route orders to us and communicate with us. In other words, they route an order to our trading system, and if we execute it, we send a message back telling them the trade was executed," explains Choe.
Brokerage firms route orders to MarketXT on behalf of their individual investor clients--as well as on behalf of their own proprietary accounts on occasion. Individual investors who want to route an order to MarketXT, Choe says, must go through a broker. " We provide a mechanism on the Internet for trading stocks after hours... and we are very much like an exchange in that we are an execution point for a brokerage firm's orders," he says.
Traditionally, Choe adds, retail investors don't "make markets" in stocks. With that fact in mind, he says, MarketXT has formed an agreement with its partners/owners that calls for those firms to continuously pump liquidity into the system. "Any time throughout the session, if you want to trade in one of the securities that trade on our system, you can pull up that security and there will be a bid and an offer out there.... You never have to worry about putting up your own bid," he says.
MarketXT also tries to differentiate itself from other alternative trading systems by showing its full order book to customers. "We don't just provide the best bid and offer on the system. We provide the entire depth of the market, so that everybody can see what everybody is offering or bidding," says Choe.
Besides its liquidity and order book features, Choe says MarketXT's focus on retail investors also separates it from the pack. "We cater to smaller orders. We put in protections in the system to protect individuals who trade after hours," he says. Those protections, Choe says, include volatility alerts that inform people when trading on MarketXT is getting volatile.
Currently, MarketXT operates from 6 p.m. to 8 p.m. EST. Choe says that MarketXT's trading hours will be extended in the near future, but declines to specify how much later the system will be open. It is also likely, he says, that MarketXT will be open during some pre-market hours sometime down the road. "That's certainly an area that we want to be in in order to compete effectively in this space," says Choe.