Spear Leeds & Kellogg, a Nasdaq market maker and the operator of the Redibook electronic communications network (ECN), is developing an equity trade order management (TOM) system that is expected to eventually compete head on with Automated Securities Clearances (ASC) Brassthe leading TOM in the Nasdaq market. The system, dubbed EagleTrader and scheduled to launch in the fourth quarter, is being built by Eagle Software Products LLPa Spear Leeds business unit that develops trading applications. Currently, EagleTrader is in beta tests at a quartet of firms.
Mike Appleby, a managing director of Spear Leeds and the head of Eagle Software, says that EagleTrader is being targeted at "Nasdaq retailers, Nasdaq wholesalers and medium-to-large-sized Nasdaq market makers." While declining to specify the firms that are currently testing the product, he says EagleTrader will go live before year-end. Moreover, Appleby says that by the second quarter of next year, Eagle Software plans to release a listed version of its TOM application.
In the immediate future, however, Spear Leeds appears to have its eye squarely on the business of Brass, which has a stable of roughly 150 U.S. broker/dealer clients and processes approximately 50% of Nasdaqs daily trading volume. Like EagleTrader, Brass has a direct connection to an ECN. In Brass case, its the Brass Utility (Brut) ECN, which is expected to soon finalize its planned merger with fellow ECN Strike Technologies (ETW, 9/13/99). Brut, like Brass, is presently majority-owned by SunGard Data Systems, the Wayne, Pa.-based vendor that purchased ASC earlier this year (ETW, 3/15/99).
EagleTrader, of course, will provide a direct gateway to Spear Leeds Redibook ECN. However, while acknowledging that the EagleTrader/Redibook connection could potentially boost Redibooks order flow, Appleby emphasizes that EagleTrader clients will be free to send orders to just about any ECN they want. "We are not obligated by Spear Leeds and Kellogg to favor any of their own internal efforts ... and we will go to all of the ECNs that are willing and able to take communications interfaces from us," he says.
Interestingly, though Appleby downplays EagleTraders potential assault on Brass turf, he concedes that Brut is the only one of the nine SEC-approved ECNs that EagleTrader will not initially provide an interface to. Primarily, he says thats because Brut is a "somewhat enclosed system" that has "no interest in allowing the rest of the world in." However, Brut has in the past signed connectivity pacts with at least two ECNs: Datek Onlines Island (ETW, 6/14/99) and Strike.
Still, Appleby says that EagleTrader will take a very open approach toward routing orders to execution destinations. " If theres sufficient demand for a destination, well allow you to send orders there. Well also allow anyone to connect to us, but obviously in some cases we will charge transaction fees," he says. Appleby declines to get more specific about those fees.