FIX Key to Orc-Cameron Merger

LONDON—Orc Software and OMX are set to embrace the FIX protocol if a merger between Orc and Cameron Systems of Australia is approved by shareholders on Jan. 26, officials tell DWT.

Late last month, Orc signed a deal with Cameron, valued at $32 million, that will be financed via $11 million in cash and $10 million in Orc shares. Another $11 million in cash will be paid depending upon Cameron's financial performance for the fiscal year, ending June 30, 2006. Orc's shareholders are expected to approve the deal during a general meeting. OMX Technologies, a subdivision of OMX Group, is a major Orc shareholder, and provider of technologies for exchanges.

"We are moving toward the FIX protocol," says Anna Rasin, vice president in charge of communications and marketing at OMX. "We owned an API before, and [the deal] is a way to get the FIX protocol quicker," Rasin says. OMX declines to comment further on the future deployment of Cameron's solutions.

"OMX has not done much with the FIX protocol," says Martin Koopman, president of Cameron Systems. "It just has a FIX interface. With this deal, OMX will make a foray into FIX," he adds.

While many exchanges do not offer support for the FIX protocol, the deal with Cameron will allow Orc and OMX to expand the use of the protocol among their customers. An Orc spokesperson says that it is impossible to pinpoint how many clients may be using the Orc protocol instead of FIX—some clients use both for their operations.

The deal could also further Orc's multi-asset trading push. "We see a lot of industry players mentioning multi-asset trading today. This deal fits in this trend with Orc providing numerous connectivity and multi-asset products," says Axel Pierron, analyst at Celent Communications.

Under the terms of the deal, Cameron, which will initially be left independent, will continue to focus on FIX engines. The two companies will merge their offices in New York, London and Sydney, and no redundancies are expected.

"For quite a while, many of our customers have been using a simplified version of our FIX gateway to connect to other systems or liquidity pools," Lindström says. Orc's existing FIX gateway enables clients to enter orders, receive trades and subscribe to market data information from exchanges to which an Orc server system is connected. However, Lindström says this gateway isn't the best engine for the FIX protocol.

The demands for a more powerful FIX engine compelled Orc to investigate its options. "A year ago, we looked at either employing more people to develop our own FIX gateway or to partner with an existing vendor," Lindström says.

Early in 2005, Cameron Systems was looking at ways to expand its businesses. "As a small private company, we had been approached by big companies to buy us or partner with us, but we always declined," Koopman says.

"Cameron was at a crossroads where they could either take their company to the next level to meet the demands of the market, or be part of a larger organization," Lindström says.

Koopman tells DWT that his company selected a pool of companies that expressed a desire to acquire Cameron. "Orc offered the best for our products, staff and shareholders," Koopman says. "Orc is not competitive to our [existing] partners. Some companies we were talking to were competitors. Orc understands the value of our partner network."

One of these Cameron partners is the London-based LogicScope Realisations, a provider of post-transaction messaging and market data integration solutions. "From our perspective, we focus more on the treasury side rather than equities," says Nick Dyne, managing director at LogicScope. "Orc at the moment has no treasury presence. Through our relationship with Cameron Systems, Orc will be able to get itself into the treasury space," Dyne says.

Orc will replace its internal FIX gateway gradually. "In the spring, our customers will have the choice between either the existing offering or the Cameron FIX engine," Lindström says. "It will depend on their level of usage. As for new customers, they will use Cameron's product right away."

Lindström expects all Orc customers, who do not already have a FIX engine to be working with Cameron's FIX engine over the next 18 months.

Trading Technologies (TT) partnered with Orc in November 2005 so that Orc could bring connectivity to the X_Trader trading solution. "TT uses its own high-performance FIX engine and has no plans to replace it," says Bob Slezak, chief technology officer (CTO) at TT.

According to Lindström, one of the reasons behind the deal is compliance with the future European regulatory directive, Mifid.

"Mifid will increase the pressure on the industry with needs for much more transparency and best-execution offerings," Lindström says. "FIX is an established protocol in this domain; it will become the glue between the [market] players."

Pierron says the two companies could help their clients comply with the Mifid regulations. However, the analyst remains cautious. "I am always concerned about synergy creations. It brings the ability to attract new customers, which I think is true, but the market is reticent to accept a monopolistic approach, of having one major vendor in a certain domain," Pierron says. "The success [of this acquisition] will depend upon how the two companies channel these synergies."