Zero integration headaches

Execution management systems (EMS) will prove to be one of the 'buy-side technologies of 2007' as investment managers look for DMA, aggregated liquidity, access to broker-supplied algorithms, and a variety of market data feeds from a single interface. LatentZero has gone one step further by developing an EMS that sits alongside Minerva, the firm's long-established OMS offering. By Victor Anderson  

LatentZero is a buy-side only provider of front-office technology headquartered in London and Boston. The company was founded in 1999 by chief executive Richard Jones and Dan Watkins, who runs the company's North American operation. LatentZero has over 70 customers, including nine of the world's largest 10 asset managers, as well as a range of smaller institutions and hedge funds around the world. LatentZero is privately owned and employs 175 people worldwide. In addition to major centres in London and Boston, the company has regional offices in Paris, New York and Frankfurt, and is also operational in Asia and South Africa.

Although this product profile focuses on Minerva EMS – scheduled to be launched sometime this month and designed to be deployed alongside the firm's Minerva OMS (order management system) – LatentZero does have a number of other offerings currently in the market, which, when implemented as a suite, are known as Capstone. Capstone comprises three core components, all of which offer cross asset-class support:

- Tesseract, a portfolio analysis and modelling application

- Minerva, an OMS and trading platform

- Sentinel, LatentZero's first and best known offering on the buy side providing pre- and post-trade investment compliance.

Each of the above-mentioned products can be deployed separately, or as a single, fully integrated front-office system – Capstone.

Additional Capstone modules include:

- Derivatives, an overlay providing integrated securities and derivatives position management, trade capture, pricing and life-cycle management for OTC derivatives

- Minerva EMS, which adds a variety of execution management functions to Minerva's core OMS functionality

Capstone is underpinned by service-oriented, event-driven architecture, which, according to LatentZero, achieves better real-time performance and throughput levels than standard database architect-ures. The product is commonly deployed globally from a single, central database.

The integration of, and interoperability between disparate systems, is one of the perennial challenges facing buy-side IT managers. This is especially the case in the front-office where buy-side organisations are faced with either engineering proprietary applications to suit their needs – that is, if they have the necessary IT skills, time and head count – or contracting third-party technology vendors to implement an off-the-shelf system, which needs to be 'plumbed in' to the existing architecture to ensure interoperability. Both options present their challenges, but anecdotal evidence suggests that all but the largest buy-side organisations are more likely to take the third-party route than write their own technology in-house.

LatentZero's Minerva EMS is by no means one of the first EMS offerings to hit the buy-side market – offerings from FlexTrade, Portware, EdgeTrade and ITG (formerly known as the Macgregor Financial Trading Platform) have been around for some time – but it is unique in the sense that it is a dedicated EMS specifically designed to sit alongside the firm's OMS, already implemented at 40 buy-side firms with an average of eight traders per firm.

According to LatentZero, more than two years ago the firm's management recognised that the future lay in an integrated, broker-neutral OMS/EMS platform – in essence a single system providing full cross-asset OMS functionality and compliance, along with built-in real-time market data and core EMS functionality. Although buy-side firms can gain access to EMS functionality via broker solutions or third-party specialist products, LatentZero predicted that buy-side traders would tire of the 'swivel chair' workflow and lack of control from using multiple systems; the company therefore invested in a team to focus on EMS extensions to the Minerva OMS.

LatentZero's EMS solution, Minerva EMS, will be launched this month and has been designed to focus on those aspects of EMS functionality that are relevant to the buy side. Minerva EMS is in the throes of completing its six-month long trial period at three UK-based buy-side organisations, two institutional investment managers and a hedge fund.

The module is an optional extension to the Minerva OMS, and creates a single, integrated OMS/EMS solution for both single and list orders across global markets.

From its core OMS blotter, Minerva EMS provides aggregated liquidity views and access to:

- Broker-neutral DMA (direct market access)

- Broker-supplied algorithms

- ATSs (alternative trading systems)

- Standard broker care and principal orders

This allows buy-side traders to mix and match execution strategies according to investment objectives and target benchmarks. Any broker that provides DMA connectivity via FIX can be supported by Minerva EMS. Streaming Level 1 and 2 market data is provided from Reuters, Bloomberg or broker-sponsored market feeds.

The system also includes pre-trade transaction cost estimates from multiple sources, and intra-day execution monitoring versus benchmarks. Support for fixed income and foreign exchange instruments is planned for future releases.

Minerva OMS/EMS provides a workflow that does not require order staging between systems. It includes cross-asset OMS functionality such as order generation, position keeping, allocation, commission management and trade confirmation. According to LatentZero, 'tight' process controls, a single, central OMS/EMS audit trail and integrated investment compliance reduces the risk of error, and provides a platform for 'best execution' monitoring.

The system has been developed using LatentZero's standard technical architecture. The user interface is built in C#, with the back-end supported by LatentZero's SOA (service-oriented architecture) components. As for all of LatentZero's products, the system can be deployed globally, so, for example, if the central database and servers are installed in New York, a London buy-side trader can use the system and gain real-time access to global markets.

Minerva EMS upgrades can be taken separately from the OMS.

A software license is charged for the EMS module and a standard connectivity fee is charged to brokers and ATSs. There are no transaction fees.

The below-listed firms provide similar EMS products to Minerva EMS. LatentZero sees Portware and FlexTrade as direct competitors, while ITG, EdgeTrade, TradingScreen and InfoReach have mature products in the same market segment. GL Trade launched its EMS offering in October 2006.

- Portware - FlexTrade

- ITG - EdgeTrade

- GL Trade - InfoReach

- TradingScreen