Software developers are rapidly networking portfolio management and trading software programs through new electronic messaging, data and Internet links.
With the new links, buyside firms will be in electronic touch with many more broker/dealers, alternative trading networks like Instinet, custodians, clearinghouses and others. Developers also are interconnecting their own programs and enabling or simplifying connections with other programs.
One current focus in establishing links is adding the Financial Information Exchange protocols to software programs. FIX is an increasingly important standard for exchanging messages in ordering, routing and executing trades.
In 1999, Boston-based Thomson Investment Software's PORTIA Opentrader securities trading software is expected to add FIX messages. The addition of FIX to Opentrader will allow its users to send and receive orders and executions to TradeRoute, an electronic order routing and execution reporting service, to independent brokers and to virtually any other software using FIX.
Opentrader is a gateway that links traders with brokers, exchanges and electronic networks.
In November, Advent Software Inc., San Francisco, announced an agreement to add FIX messaging capabilities to Moxy 3, the firm's trading and order management software.
Advent licensed the Coppelia server of Javelin Technologies Inc., New York, to provide FIX capabilities, as an option.
Also in November, Transaction Network Services, an electronic network, announced an alliance with TradeWare Corp., New York, to provide a FIX messaging network for equities trading programs at what Transaction Network says is an affordable cost.
The addition of FIX capabilities follows the addition of other significant links.
Advent, Princeton Financial Inc., Wilshire Associates Inc., QED and Thomson's PORTIA have upgraded or added interfaces to software that permit links with the Depository Trust Company for confirmation of trades, entering trades or trade matching to approve trades or locate errors.
In September, the DTC launched TradeSuite to allow counterparties a single access point for post-trade communications on a global basis. The addition of TradeSuite is an attempt to support global straight-through processing.
The DTC link is one of many. Marlton, N.J.-based QED, for example, has more than 200 existing interfaces for electronic transfer of trade information with investment advisers and custodian banks. Recently, QED completed an interface to State Street Bank & Trust Co., Boston, for trade information and position matching.
One reason for client emphasis on linking software is what is called scalability. "Once you are able to scale the business without adding people, every transaction, every added account can be automated from start to finish," said Stephane Dubois, vice president of product marketing with Advent.
Investment staff need focus only on exceptions with a properly automated process. But if an investment manager is "missing some links" in that electronically automated process, then he can't increase business "without adding people, and that is a problem," said Mr. Dubois.
Many of the new electronic links between software programs are in real-time.
Princeton, N.J.-based Princeton Financial's PAM portfolio management software can capture trades in real-time from a third-party trading system, fill in missing security information from a software data vendor and incorporate corporate action information from still another data vendor.
Advent's Geneva global portfolio accounting system offers real-time error correction. A mistake that would take days to correct in some programs now is done virtually instantaneously on Geneva.
The CAMRA Derivatives 2000 software of SS&C Technologies Inc., Bloomfield, Conn., offers real-time transaction processing of pricing, valuation and risk analysis.
Santa Monica, Calif.-based Wilshire's Abacus portfolio accounting system has what is called a transaction update engine, which permits real-time processing of trades to update trading positions, market values and performance.
To make connections useful, software vendors are installing reconciliation programs like Thomson's ROSIE (Redenomination of securities into euro). It seamlessly automates the redenomination process for the euro. ROSIE is integrated with PORTIA portfolio management software.
Advent's Rex reconciliation software can eliminate manual entry of data with many custodians, and Advent is continually in the process of adding more electronic connections with custodians.
Another form of integration is integration of a software vendor's own programs.
Advent brought out its Office product, which comprises six portfolio management programs designed to work together. Besides Axys, Moxy and Rex, Office includes Qube, client relationship software; Warehouse, a data warehouse; and Partners, a partnership accounting and layering software.
One purpose of Advent Office is to link money managers' client relations and portfolios, said Mr. Dubois. When a manager calls up a client, he also calls up the client's portfolios and detailed information about those portfolios.
Software developer SS&C has integrated its CAMRA 2000 portfolio management program with its new Antares 2000, a trade management system.
SS&C developers say the integration provides true front-to-back transaction processing, accounting and reporting.
SS&C is moving toward straight-through processing or paperless management and trading of portfolios.
"The best information is virtually useless if the right people can't access it when and where they need to," said William Stone, chairman and chief executive officer at SS&C.
SS&C is spending $5 million a quarter on research and development to achieve straight-through processing.
To help clients make some of their own software connections, Princeton Financial recently brought out its Software Development Kit. The training, documentation and support kit permits inhouse computer technicians to customize Princeton Financial programs and add such things as messaging services or data transmission interfaces, but without writing in the difficult C code.
"It is a tool kit that you can buy that allows technical developer-type people to add functionality to the PAM system without writing in native C language," said Gordon Gacek, a spokesman for Princeton Financial.
When Wilshire brought out a Microsoft Windows version of its portfolio accounting and management program Abacus, it completed a suite of products from the firm's Quantum series: Atlas, global equity analytics; Axiom, fixed income analytics; Equator, index fund management technology; and Horizon, asset allocation and asset and liability management. Abacus previously had been running in OS2.
Advent's portfolio management product, Geneva, is integrated in the sense that it offers more functions than most programs, including multicurrency accounting, double-entry accounting, automated transactions and accounts for all domestic and international investments and more.
Advent products have a number of links to the Internet. Advent's Axys creates reports in hypertext markup language, the language used on the World Wide Web. Its Data Exchange Server collects data over the Internet.
SS&C has established an outsourcing group that enables information and reporting retrieval and delivery through the Internet. It also uses the Web for product distribution and client communications.
SS&C's The Report Center allows users to set up and schedule reports, package them and automatically distribute them to their clients through the Internet.
