Instinet Builds IT For Equities And Bonds

NEW YORK--Instinet's busy, busy, busy. In fact, in the July issue of Waters magazine, executives there outlined its current efforts to introduce fixed income trading, rebuild its equity platform, roll out block trading and tap the huge retail market.

But that's just the tip of the iceberg. "Instinet will be the center of Reuters' e-commerce strategy," Instinet president and CEO Doug Atkin told Waters. In the meantime, there's a whole lot of building going on. Atkin says he expects to spend about $100 million on IT this year.

But then, that's not surprising. "At Instinet, the technology function is seen as a product development function. Even though we're technically not a vendor, the provision of our service depends on the delivery of the technology," says John Oddie, Instinet's chief technology officer.

In fact, Oddie and his 170-person development team are hard at work on the equity platform and are aiming to finalize a front-end strategy in the next few months, start adding distribution channels in early 2000 and get back-end conversion done by June 2000.

There's a two-prong approach: convert some components, like the back end, and "take a radical look" at others, like distribution and the front end, Oddie says. Instinet's also targeting telecommunications, says Atkin. "Our communications costs will go way down." Another issue for the front end is compatibility. "What we want to do is optimize the ease of use of our product in conjunction with a bunch of others," Oddie says.

Then there's the long-awaited fixed income platform, which is being readied for beta testing this summer. And while that system is aimed at sell-side firms, Oddie's paying close attention to the technology decisions being made there as he works toward finalizing his own choices.

The fixed income trading system, built from scratch, uses Sun Starfire core servers, Sun E300 caching servers, an Oracle database, Persistence application server software, Tibco's publish/subscribe technology and Java clients.

Cambridge Technology Partners provides system integration, while Neon provides straight through processing via its Neon Trading System, TIB/
Rendezvous (RV) offers the transport layer and Javelin its Coppelia FIX engine.

"The core technology is being driven by combining Tibco's TIB/RV infrastructure with the object caching technology that's provided by Persistence Software," Duncan Johnston-Watt, Instinet's director of technology development for fixed income, told Waters.

In fact, the Enterprise Javabean global deployment is the largest such implementation to date, he says. And UK-based Push Technologies is providing the first production-quality, 100 percent Java implementation of the Java Messaging Service Enterprise API. "This allows us to efficiently distribute data to our client's desktop, which is itself a Java client," says Johnston-Watt.

Instinet also benefits from being part of Reuters, says Instinet managing director Peter Fenichel. Instinet needed access to a high performance shared network, he says, and Reuters runs one. Reuters has "a remarkable set of data components in the Reuters 3000 analytics product that we use because it drives the terms and conditions that underlie our product."

The Instinet fixed income platform will initially focus on the "Euro Sovereign" market, including the 11 euro countries and the UK. But it will eventually support any instrument in the Reuters Terms and Conditions fixed income database--over 450,000 items.

The system is fully customizable by the trader, although there is a standard default setting. Bonds can be sorted by either coupon or maturity or by ticker or other categories. Any bond can be compared to any curve, say sources at Instinet, and the trader can transact from any view on the screen.

Other functions include a "sweeping the book" option, which offers book depth. Bid and offer prices are ordered in a price/time priority. Functions are available in pop-up windows so that traders can get on with other things on their PCs, say sources at Instinet.

The system has a variety of security features, including a "Leeson alert," which tips off Instinet brokers if a client is acting out of the ordinary, and an auditing capability that tracks every keystroke. The training environment is totally different from the actual trading environment--with a different color and a different log-on procedure.

Beta sites for the fixed income system have "all been selected, bar one," say sources.

Instinet is currently building a new trading floor for fixed income brokers at its European headquarters in the City of London. It will also have brokers in Frankfurt, Paris and New York, possibly adding other cities such as Madrid later in the year.

Want to know more? Check out the July issue of Waters, which hits the street today.