PaineWebber Picks Teknekron, IBM For Derivatives Trading

PaineWebber Inc. has tapped Teknekron Software Systems Inc. and IBM to provide a local data delivery system to support trading in derivative instruments in New York. The proposed system, sources close to the implementation say, will use IBM RS/6000 workstations running AIX, IBM's version of UNIX.

Sources say Teknekron earlier this month received PaineWebber approval to proceed with the implementation following a feasibility study conducted a year ago by Teknekron. The study, which analyzed PaineWebber's trading systems requirements, came on the heels of a wider systems analysis at the firm, said to have been conducted by an outside consultant.

The sources describe the planned installation as "small." They say that other areas of PaineWebber's New York trading operation, including its bond-trading group, currently are not involved in the IBM-Teknekron deal. PaineWebber and Teknekron spokesmen couldn't be reached for comment.

Details of the system couldn't be confirmed. But sources familiar with another Teknekron-IBM RS/6000 implementation say the PaineWebber trading room likely will use Teknekron's TIB digital feed handling and workstation software. The trader workstations, these sources say, likely will support X Windows, and will be connected by an Ethernet LAN running TCP/IP.

Teknekron may also provide analytics software such as its Marksheet package, these sources speculate. Sources close to the planned implementation, meanwhile, say PaineWebber will install at least one workstation supporting Integrated Analytics Corp.'s MarketMind decision-support system.

PaineWebber has had a stop-start record of trading technology implementation in recent years. During the mid- 1980s, the firm invited a group of vendors to participate in an 18-month selection process for a 225-position trading system for its institutional equity trading group. In a surprise move, PaineWebber named AT&T and Asset Management Technology Corp. finalists for the contract, but reserved the right not to award the deal. In the midst of a budget crunch, the firm eventually exercised that right (TST, Dec. 19, 1988).

"The problem is money," grumbles one vendor. "They have big ambitions but when you get right down to it, they don't have the follow-through."

Whether PaineWebber will have the follow-through this time remains to be seen. But industry observers say problems at another Teknekron-IBM installation may reemerge at PaineWebber.

Sources familiar with the project say Teknekron ran into problems at First Interstate Bank in Los Angeles where it began installing a 70-position trading room system to support the bank's foreign exchange and money market operations two years ago. The implementation, using the IBM PC RT as the trader workstation, suffered network difficulties, which Teknekron attributed to the IBM machines, the sources say. In response, IBM is currently swapping out the RTs for RS/6000 workstations, sources at First Interstate say.

"Unfortunately, the RS/6000 has many of the same performance problems that the RT does," one source says. "Whether it's the hardware itself or the [operating system] on the IBM is not clear yet." Another source attributes the problems to AIX, calling it "a poor stepchild" of IBM's software development effort that hasn't "received its fair share of resources."

PaineWebber's decision to go with the RS/6000 for its derivatives trading room system follows the renewal of its retail brokerage quote terminal contract with Quotron Systems Inc. That system eventually will use RS/6000 machines as local servers supporting Quotron market data services (Inside Market Data, March 4).