Managing MiFID, Tick by Tick
ON THE RECORD
With clients including the Chicago Mercantile Exchange and the Chicago Board of Trade, London-based ticker plant vendor CMS WebView seemed perfectly positioned to take advantage of the low-latency race. However, the vendor was forced to change its strategy earlier this year after sales of its TDI ticker plant proved disappointing. As a result, CMS sold its consolidated feed business to Tenfore Systems and focused on sales of the TDI software's source code. CMS chief executive Bob Antell recently explained the new strategy to IMD.
IMD
: First, we owe you an apology: Max Bowie's Opening Cross column recently said that CMS had decided to "cut its losses and pursue other areas" outside your traditional market data business. But you say that's not the case—can you clarify the situation?Bob Antell: First of all, I very much appreciate this opportunity with Inside Market Data. I can see how that comment may have been arrived at, but the main message that I'd like to get over is that we're here, alive and kicking, with a very clear strategy for our product. But recognizing that the previous model didn't work… we've turned the negatives into positives, and the one thing that can't be questioned is the credibility of the technical aspect of the product. It's installed in three blue-chip organizations and has never failed technically or operationally.
IMD
: But back in June you said you would look for "lateral directions" for TDI. What does this mean in the context of your new business strategy?Antell:
I think this was prompted to a large degree by sitting back, dusting ourselves off and thinking why didn't people buy over the past 12 months or so when we've had tremendous success with the CME and CBOT. The CBOT uses it to distribute data from the Winnipeg Commodity Exchange, the Minneapolis Grain Exchange, the Kansas City Board of Trade, Dow Jones Indexes and now Jade, as well as their own floor trading and electronic trading. One of the lateral processes that we derived from talking to practitioners in the marketplace is that people are increasingly looking for control—whether it's the IT people wanting to develop the code, whether it's having complete IP control… So the lateral thinking was to take a design tool that we've been using in house for many years and to do what was necessary to offer it as a marketable product. So as well as saying you can now buy the code… you've also got the design tools to allow you to go forward with your own staff and tailor the product how you'd like [and] the current version of TDI, version 4, has been designed to be much more… marketable to people that want this type of control.IMD
: How do the recent partnerships with Velocity Sales & Marketing and KB Tech contribute to this?Antell:
The other piece of lateral thinking was the way that we're actually deploying resources now. The resources we have internally are still enough to run the regulatory aspects of the company because we're still an AIM-listed company. We also formed this relationship with Velocity—with very good experienced practitioners… like Malcolm Donaldson who was GL Trade's chief executive in London and grew them significantly in London, and Greg Johnson, who was also sales and marketing manager for GL Trade. So that was part of our lateral thinking—using specialized resources and forming relationships. On the technical side, we formed a relationship with KB Technology. One of their directors, David Briggs, worked on the development of TDI Version 4, so we felt that was something the industry is beginning to accept much more readily. We've not found any negatives in going to people and saying "our technical resource in presales, during sales or after sales will be provided by KB Tech."IMD
: Were these agreements necessary because of the reductions in sales and support staff at CMS?Antell:
We reduced resources because the previous business model wasn't working and any board of directors has to respond to these situations. So deciding to sell the IPR rights with the design tools… we decided that would be through relationships with specialist companies.IMD
: Do you anticipate Velocity helping CMS to identify and target new markets? What new areas could TDI be used in? Have your target customer markets changed since the summer?Antell:
One of the reasons we went with Velocity was their breadth of experience in various sectors of the marketplace. We're still going to be aiming TDI at the traditional data management processing environment, which existed before MiFID of course. But some new areas that people within Velocity have experience of is the algorithmic trading environment—an area that CMS hasn't ventured into before. But initial indications are that TDI lends itself very well to that area. However… the MiFID issue is something we've looked at in detail with Velocity and KB Tech because it's a mixture of a business and technical issue.As a small company, to really get involved with MiFID would have been very difficult. But there are some sectors that have become a little firmer. With market practitioners in MiFID—large consultancy firms, people starting MiFID projects, industry consortia—the interesting thing is that so many people get fed up when you say we have an answer to MiFID. But… a product like TDI was initially designed to deal with data collection, processing and distribution for exchanges… real-time databasing, handling and record-keeping of data, channelizing data, dealing with things like repeated data sets, bad data transmission and also channeling data coming in—having to deal with different data sources. So... we're not going to make an announcement saying we are a solution to MiFID, but what we are going to do is emphasize the flexibility of the design to people that are involved in MiFID projects. We think the big boys are probably going to go off and do their own thing. The people at the bottom are probably going to be looking at service bureau solutions. So it's the middle tier that we're aiming at—the boring admin issues we've been used to for a long time.
IMD
: Can you detail how the company has streamlined itself since this summer's financial statement? How has the company's focus changed as a result?Antell:
In the shortest sense, we cut back on staff, having made the decision to go to the relationship model or outsourcing model. So, on the marketing side and the sales side we've cut back on staff because we now have these relationships in place. In the last round, about 10 people were laid off. Bearing in mind we're quite a small company, that's a reasonable amount. Obviously, we have to make sure we're fully compliant, so we talked to our nominated advisor and double-checked that our new model was compliant—not that for one minute we thought it wasn't going to be. So we have to retain financial and administrative functions and a board of directors, and so on… we've had a couple of years of hard knocks, but we're really excited about the future.IMD
: How will this prove accretive to CMS's financial results? How long will it take for the strategy to take full effect?Antell:
Our interim results for the first six months have been published. We'd be extremely disappointed if the second six months weren't a dramatic improvement.IMD
: What resources will a firm that buys the TDI software need in place to develop and support it to their needs?Antell:
That's a very good question. That was one of the questions that we asked ourselves when we came up with our new model. To think we could just hand over the code… would be a mistake. People want in-depth discussions before they even get close to buying, so there was pre-sales support needed. Sometimes people want a proof of concept so they might commission small projects—so we'd need to provide that for them. Someone might say "I've read your SDK, but I still want a proof of concept"—so KB Technology can do that for us… Obviously the sales side is also something you'd need in place and we have that with Velocity.IMD
: Will CMS continue to develop the software itself to ensure it remains current and attractive to potential clients? If so, what developments are on the cards? If not, how will you keep pace with the rapidly evolving demands of the market data industry?Antell:
Absolutely. While this is state of the art, nothing can be state of the art for years. What we've been concentrating on at the moment is the design tools aspects and representing that in a more commercial way. There will be other developments that come along, some of which will be market-led and some of which will be led by the sales that we get. Again, when TDI was initially designed, data was data. It wasn't specifically designed for futures, derivatives or equities—it was just data. So we didn't appreciate that until we started to evolve this new model.IMD
: Will you find a way to incorporate the developments that clients undertake into future versions of the software?Antell:
One of the strengths of the new model is allowing people that want control the ability to run with the ball. If they are practitioners and they are experienced, they will look at a project and think, "How long will it take me in man-months to go where we're going?" If they've made the decision to do it themselves, they recognize that they are going to be on their own going forward. I wouldn't like to second-guess the nature of some of the commercial arrangements, but we're not assuming that we'll get any of those developments back into the product. It wouldn't be a complete surprise to me if someone tried to negotiate what they're going to pay for TDI by offering what they're going to develop for us to market. One thing they won't get is the rights to market TDI and start their own organization, but we can talk about joint marketing arrangements for any developments they make.CEO Confidential
Name:
Date of birth: 29 September 1953
Hometown: Fareham, Hants, UK
Education: Degree in Electronic Engineering, Kings College; PhD in High-energy Lasers, Kings College
Current Home: Upminster, Essex
Family: Married, two dogs
Q: What book are you currently reading?
A: Ten Days That Shook the World by John Reed—it's about the Russian revolution in 1917.
Q: What CD is in your stereo?
A: Trouble by Ray LaMontagne.
Q: Which sports team do you root for?
A: I've got season tickets to West Ham and Arsenal. My wife and I go to West Ham every match.
Q: What did you do for your summer vacation?
A: I went to the Isle of Mann TT race with my wife. We stayed a week, watching all the racing.
Q: What's your favourite place to visit and why?
A: I've been lucky with my job to travel a lot, but when you come back to London you appreciate how good it is. So I'd still say London.
Q: What newspapers or magazines do you read?
A: I read Bike magazine. I don't read a paper every day but when I do it tends to be The Times. I do generally read Inside Market Data even if it means I have to crib someone else's copy.
Q: What was your first paying job and how old were you?
A: I was about 10 or 11 years old and was a golf caddy at Ferndown Golf Course in Dorset.
Q: How much sleep do you get?
A: I normally aim for seven hours. I can get away with less if I haven't been drinking.
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