Eyeing the buy-side community's demand for tying electronic execution and cost-measurement tools into the rest of the portfolio management process, Investment Technology Group (ITG) announced plans to acquire Macgregor, a provider of buy-side trade order management systems (OMSs), for $230 million in cash.
The pending transaction ends months of speculation surrounding a possible sale of the Boston-based OMS provider. Macgregor's software is a central hub for trading used by 110 blue-chip institutional clients - including Babson Capital, Delaware Investments and T. Rowe Price -with about $5.5 trillion in assets under management.
Rumors had circulated that Reuters, SunGard and Thomson Financial were among the bidders for Macgregor, according to industry sources. But, ultimately, ITG, a pioneer in developing algorithmic trading strategies as well as pre- and post-trade transaction cost analysis (TCA), prevailed over the pure technology companies.
Calling the combination with Macgregor "a strategic initiative," ITG CEO Raymond Killian suggests the move will position ITG in all phases of the investment management process. Now, ITG operates in three phases of the trade life cycle: pre-trade analytics, execution and measurement of how well you executed with TCA. Meanwhile, Macgregor covers the continuum from manufacturing of the portfolio and establishing compliance rules to delivering the trades and execution to compiling execution reports, he notes.
"Strategically, a lot of orders are being handled electronically today. It's low-touch technology - I think that's an irreversible trend," says Killian. "So having a complete cradle-to-grave solution is an obviously attractive position to be in," he relates.
One question is whether Macgregor will continue to be perceived as a broker-neutral platform since it will be owned by ITG, a technology provider that offers its own algorithmic trading strategy servers and has a broker-dealer that operates the POSIT crossing network.
Celent analyst Denise Valentine suggests that Macgregor should be run as a separate company. "If the buy-side community perceives that there's a conflict of interest or a product that is an ITG broker product, they are less happy about it," she says.
"In terms of being aligned to a broker-dealer, you certainly lose some level of independence," notes Sang Lee, managing partner at Aite Group. "But, at the same time, there aren't that many independent technology providers out there," adds Lee, who compares the situation to Goldman Sachs' ownership of the REDIPlus platform and Citigroup's acquisition of Lava Trading.
Management for ITG and Macgregor assured customers that they are committed to remaining broker-neutral. 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