Merrill Singapore Mulls Systems For New ASEAN Currency Desk

Merrill Lynch is on the lookout for new trading and analytic systems to support its recently launched ASEAN currency financial products desk in Singapore. The fledgling ASEAN currency and debt products group currently relies on a combination of systems, which any new systems would augment or replace. Incumbent applications include a set of Merrill-homegrown Unix-based forex and debt trading systems and a collection of Microsoft Excel spreadsheet-based programs for trading and decision support. Alternatives that have been considered include homegrown developments and products offerings from Murex and FNX, among others.

Meanwhile, separately, Merrill Singapore is working to gain approval from senior IT leadership in New York to deploy Reuters-subsidiary Tibco's TIB real-time digital data distribution platform, sources say. The Singapore branch currently relies on Reuters' own Triarch 2000 to distribute real-time news and market data across its equity, treasury and capital markets trading floors.

Finally, and also separately, Merrill is considering using Reuters' newly released Securities 3000 to support its growing equity operation in the Asia Pacific region. Merrill's technology group has been running the 3000 series on a test basis in Singapore for around a month now, according to one source.

Officials at Merrill Lynch decline to comment or could not be reached by press time. But sources indicate that technology teams at Merrill Singapore have been doing their best to match the rate of growth set by the business units there.

Over the past two years, Merrill's Singapore operation has grown from around 30 to some 200 staff, according to one source. As a result, IT and trading room support staff are looking to expand Merrill Lynch International Bank's (MLIB) treasury and capital markets trading floor in the first quarter of 1997. MLIB currently has between 35 and 45 front-office staff on its Singapore trading floor, with forex salespeople and traders being the single largest group.

It was in the past month that Merrill launched Singapore's ASEAN currency and debt products group, according to the source, hiring Bank of New Zealand's John Duncan to lead the effort. The ASEAN currency team currently comprises six members. It is designed to provide clients with financing solutions that integrate access to Southeast Asia's emerging currency, debt and derivatives markets, the source says. In time, this team may be expanded along the lines of similar cross-market product groups at Merrill's more established dealing centres in London and New York. The group is currently active in the ASEAN spot, forward and forex swap markets, ASEAN-currency-denominated debt and interest rate derivatives markets.

All the capital markets trading positions are equipped with Merrill's global-standard trading system platform. Traders and sales staff access applications and information services resident on Sun Microsystems' Unix-based servers via Sun Sparcstation desktops running the SunOS or Sun Solaris Unix variants. These are linked to database servers running Sybase's RDBMS.

A back-end IBM mainframe application currently posts financial markets-related general ledger entries, records transactions and tracks risk data across trading desks, according to the source. The bank's IT department is currently working to migrate this application over to the standard Sun Unix/Sybase RDBMS platform, the source notes.

Front-office ASEAN currency group forex staff currently rely on MLIB's internally developed standard Sun Unix-based forex trading system to support their activities. However, application developers at the bank's headquarters in New York are currently building ASEAN currency-based forex options functionality into the system, according to the source.

As this proprietary development effort goes on, an interdepartmental project team is also considering deploying a third-party trading system that can support the activities of the new ASEAN currency group--whether severally or centrally. To date, it has not found one that meets its requirements, however, the source says.

The ASEAN currency project team is taking a look at Paris-based Murex's Currency+ forex options trading system. Forex swaps and options traders at Merrill's New York, Singapore and Tokyo trading centres are currently testing the Currency+ system for front-office dealing and decision support.

Merrill had earlier tested Philadelphia-based FNX Ltd.'s real-time forex options dealing system in London and New York (Derivatives Engineering & Technology, July 24, 1995) and was considering using the system to support the Singapore-based ASEAN group's operations. This alternative has been dropped, however. The project team found that the FNX system didn't easily conform to the structure it has established to manage its trading books, some of which are managed on a global basis while others are managed regionally, the source says.

Merrill project team members are running the numbers--out to six decimal places--generated by alternative third-party forex options systems against those produced by Inventure's Fenics option pricing software, the source says (a de facto forex options pricing industry standard).

Incumbent systems in use by the ASEAN product group's interest rate derivatives traders include a series of customized Microsoft Excel spreadsheets. For trade decision support and position-keeping in the front-office, MLIB's Singapore-based debt products trading desk is using a homegrown portfolio management application accessible via Bloomberg terminals, the source says. The debt traders also use custom Excel spreadsheets to supplement the Bloomberg-delivered app, the source adds. Merrill is using UK-based Wilco's Gloss system for multicurrency back-office debt instrument processing and accounting.

The bank's Singapore technology group considered switching from dedicated Bloomberg terminals to the vendor's Open Bloomberg, but the associated increase in market data costs made it untenable, another source says. Merrill continues to be one of Bloomberg's largest clients. And Merrill is also holding on to its 30 per cent equity investment in Bloomberg, an equity stake its venture capital group acquired at the time of Bloomberg's founding.

Currently, each of MLIB's Bloomberg terminals is shared by two debt products group end-users. With Open Bloomberg, however, a firm must pay the full cost of Bloomberg's service for each and every trader who would have access--a billing requirement that could easily have doubled Merrill Singapore's payment to Bloomberg. The source says that Open Bloomberg's ability to distribute Bloomberg data and analytics over Microsoft's Windows NT platform was not enough to offset the added cost as MLIB Singapore's trading room desktops are predominantly Unix-based.

Merrill's technology group in Singapore has been running Reuters' Securities 3000 in a test environment for over a month now. Equity broker-dealer end-users including brokers, salespeople and researchers are considering using the recently launched service to support their activities, the source says. Singapore is the first equity trading centre at which Merrill has decided to take a formal look at Securities 3000, the source adds.

The acquisition of the Smith New Court equity brokerage added around 80 trading room staff to Merrill's Singapore-based equity group. Merrill is now looking to expand beyond its brokerage-oriented equity trading activities in the Asia Pacific region by building up its proprietary trading capabilities, according to the source.

As is the case for MLIB's treasury and capital markets operations in the Asia Pacific region, equity trading positions are equipped with the global standard technology platform established by Merrill's New York-based head office, the source says. This currently includes access to Reuters 2000-series market data services delivered via Reuters' Selectfeed Plus data feed.

Two weeks ago, Merrill announced that it is acquiring McIntosh Securities, Australia's third-largest equity brokerage. Jardine Fleming owns Jardine Fleming Ord Minnett, Australia's largest equity brokerage, while France's Societe Generale owns Australia's Bain & Co.