What’s Behind NYSE Euronext’s Acquisition of Wombat? (WallStreetandTechnology.com blog) Excerpt:

“We think it’s a good strategic fit that complements our already rich suite of products that we offer to clients to handle their trading infrastructures and hand their massive data feeds,” says Larry Leibowitz, NYSE Euronext head of global technology in an interview yesterday.

Wombat has been the leading global player in offering low-latency market data and direct data feeds from ECNs and exchanges to feed into automated trading systems. It has installations in most of the top 15 investment banks. …

NYSE Euronext plans to integrate Wombat’s market data enterprise software and services with the NYSE TransactTools connectivity and messaging business. NYSE TransactTools houses the Secure Financial Transactions Infrastructure (SFTI) network, which provides a network of transaction services including connectivity to various execution venues and third party services such as order management tools. Noting that the two product sets (Wombat and TransactTools) are complementary, during the interview, Sam Johnson, EVP and CEO of NYSE TransactTools, says, with the SFTI in the mix, they can be made available to the market in different ways.

“With SFTI’s soon to be global network, and all the different data centers scattered around its markets, you can put trading technology like algorithmic trading engines in a data center co-located next to a market,” says Johnson. “Using this technology, you can consume, process, analyze and make trading decisions on data on the lowest possible latency and get orders executed in the market,” adds Johnson.

NYSE Euronext is also acquiring Wombat to help customers deal with “the rising cost and latency demands of market data, which many of them can’t provide themselves because of the cost,” says Leibowitz. “Customers have expressed a need for as much data as possible, while they’ve also expressed concern about the rising cost of the data, he says. “The need for data has exploded in terms of products. It used to be Level One and now customers need depth-of-book products,” agrees [Ron] Jordan, NYSE Euronext’s head of market data services. “The volume of each of those data products has exploded as well,” says Jordan. “It’s a double whammy for those firms in managing this data,” he says.

Have a wonderful Wednesday, folks. Your daily dose of historical trivia:

Financial Flashback (WSJ.com)
January 16, 1987 — The almost eerie euphoria that has permeated the stock market so far this year sent the Dow Jones Industrial Average spiraling 35.72 points to its ninth consecutive record close. NYSE volume hit a record 253.1 million shares.

Also On This Day (NYTimes.com) in 1991, the White House announced the start of Operation Desert Storm to drive Iraqi forces out of Kuwait.

Operation Desert Storm also produced a 100+-point rally in the Dow, ending a months-long market slump that followed Iraq’s taking of Kuwait. I remember we held the opening that day for a minute of silence, which ended in a huge, patriotic roar on the trading floor.

Hello and Happy New Year! A new voice is being added to the Bonds blog – mine!
Let me introduce myself – I’m Helen Barounis, and I joined the Fixed Income team in September 2007, although I’ve been around the place for a lot longer than that. I started out with the Arca group back in 2000 first as a product trainer and customer relationship manager, and then moved into the realm of Market Data. Of course we’ve morphed into this new entity – NYSE Euronext over the time I’ve been here. When I heard they were forming a team for the Fixed Income side, it was natural that they could use my help!

I’m the Product Specialist for our group – so I’ll be around to help manage access, training, usability and connectivity issues that go with any kind of connectivity to the NYSE Bonds platform. With that, I hope to keep you in the know on any new developments we have on our platform, on any GUIs or third party apps you can use to connect to us, or any other relevant information on our bond market.

I did mention “news”, so on the news front, we have a few new developments.

First, the SEC has approved our new rate structure. We are reducing the transaction fees charged to liquidity takers by creating a staggered fee schedule based on the number of bonds traded. Currently, the fee for hitting/taking bonds is 50 cents per bond; that will stay the same for transactions of up to 10 bonds. For transactions of 11 to 25 bonds, the fee goes down to 20 cents per bond, and for transactions of 26 bonds or more, the fee goes down to 10 cents per bond. In addition, there will be a $100 cap per transaction. The new rate structure should help firms offset the costs of small bond executions. Oh and the new rates are in effect as of today!

Also, we are in final testing mode with the Kestral web-based front end for entering orders to the NYSE Bonds platform and hope to make it available to customers in the next month or so. In addition, we are working with Bloomberg to provide a liquidity taking piece on the Bloomberg TOMS. And if you haven’t noticed, we’re providing some real-time Bonds quotes/prices on our website – you can take a look by accessing http://viewbondsnyse.sytes.net/ (the link can also be found on our NYSE Bonds page at http://www.nyse.com/bonds.

We should have more news for you in the coming months – stay tuned, and I look forward to any questions or comments you may have!

Wanted to highlight three significant pieces in the current Securities Industry News and/or its Web site, SecuritiesIndustry.com, about three significant developments at NYSE Euronext on the options, bonds and technology sides. (Both the print version and the Web site are subscriber-only; the site does offer some articles on a free-registration basis.)

NYSE Readies MatchPoint; Reports Record Volumes~FlexTrade EMS will provide access to point-in-time trading facility (no link available) Excerpt:

NYSE expects to begin accepting orders on Jan. 22 for its MatchPoint after-hours cross, at 4:45 p.m., which will differ from competitors’ point-in-time matching facilities by allowing member firms to enter portfolio-based orders that will also interact with large individual block orders. By the end of the first quarter, the exchange anticipates rolling out intraday crosses starting at 9:45 and proceeding on the hour throughout the day.

MatchPoint’s introduction precedes that of NYSE’s yet-to-be-named joint venture with the Bids alternative trading system (ATS), a dark book owned by a consortium of large Wall Street firms. That initiative will provide market participants with the ability to match large orders anonymously, much like Bids’ current offering, as well as interact with NYSE’s publicly displayed book. It is expected to start up by midyear.

“By offering MatchPoint and our recently announced joint venture with Bids, we’re providing investors two new, complementary ways to trade block orders,” said Lawrence Leibowitz, head of U.S. products, in a statement.

Aside: speaking of MatchPoint, our marketing team just sent out a reminder to the industry about the Jan. 22 launch. Are you ready? If not, here are two links with information and required forms, respectively, or contact your relationship manager or the MatchPoint team.

Arca Options, ‘Market-Structure Leader’ Excerpt:

Introduced in August 2006, NYSE Arca Options has been a major beneficiary of the options market’s steadily rising volumes. Based on the all-electronic equities platform that NYSE Euronext acquired with Archipelago Holdings in March 2006, NYSE Arca’s share of daily transaction volume was at 16.3 percent last month, up from 14.6 percent in December 2006. It typically ranks third in options market share, behind the International Securities Exchange and Chicago Board Options Exchange.

“NYSE Arca was the fastest-growing U.S. equity options exchange in 2007, with a 60 percent growth rate, compared to the industry average of 30 percent,” notes NYSE Arca Options VP Edward Boyle. “We have plans in place for 2008 to leverage that momentum by implementing new functionalities, new products and order types, and continuing to attract new participants.”

NYSE Euronext Signs $200 Million Deal for Wombat (By Alexa Jaworski — she’s back!) — Excerpt:

Wombat has “grown tremendously over the last three or four years, and it was clear that there was an opportunity to get our core technologies in front of a much broader set of customers,” said Wombat chief executive Danny Moore in an interview. “Customers were feeling a lot of pressure around things like total cost of ownership in light of exponentially increasing data volumes. We were looking for strategies that would allow us to deliver bigger solutions but in doing so bring down the total cost of ownership.”

Wombat, which was founded in 1997, has 140 employees and offices in Incline Village, Nev., Chicago, London, Belfast and Tokyo. The company says it has more than 100 global customers, including the world’s 12 largest financial firms. It had $28 million in revenues last year, up 124 percent from 2006.

Moore emphasized that Wombat will remain “intact and highly productive” and “will continue to be a very aggressive technology company.”

Have a groovy Tuesday. Mining a little history, On This Day (NYTimes.com):

– Dr. Martin Luther King Jr. was born in 1929. We close the market next Monday — the national holiday — in honor of the great man.

– In 1967, the Green Bay Packers won the first Super Bowl, beating the Kansas City Chiefs, 34-10. I was a kid at the time and the Pack always seemed to win and seemed so iconic — Bart Starr, Ray Nitschke, Vince Lombardi — that I became a lifelong Packer fan. May they do it again this year.

– Speaking of icons, different field: the great jazz drummer Gene Krupa (1909-1973) also was born today.

Well, the week is off to a good start. Not even open yet, and we’ve made what sounds to me like an excellent acquisition:

NYSE Euronext to Acquire Wombat Financial Software, a Global Leader in High Performance Financial Market Data Management Solutions
–Wombat acquisition enables NYSE Euronext to offer customers comprehensive, end-to-end solutions for low latency trading and connectivity management– (NYSE.com) Excerpt:

…This strategic acquisition broadens NYSE Euronext’s offering of comprehensive market-agnostic connectivity, transaction and data management solutions to customers globally by integrating Wombat’s industry leading and rapidly growing market data enterprise software and services with the NYSE TransactTools(SM) connectivity and messaging business.

Under terms of the agreement, NYSE Euronext will acquire 100% of Wombat for $200 million in cash consideration, and will also create a retention pool for employees. This transaction, which was unanimously approved by the NYSE Euronext Board of Directors, is expected to close early second quarter 2008, and will be accretive to NYSE Euronext’s 2009 earnings.

“Wombat is a technology innovator and world leader in market data management solutions, and we welcome the addition of the company’s entrepreneurial management team and employees to NYSE Euronext,” said Duncan L. Niederauer, NYSE Euronext CEO. “Wombat bridges our commercial technology and market data strategies, broadening our customer reach and enabling NYSE Euronext to deliver advanced technology solutions to our customers’ increasing data management challenges.”

“Our mission to become a leader in the global market data, messaging and trading technology sectors has been a driving force for the last five years,” said Danny Moore, Wombat CEO. “Synergies with TransactTools and other NYSE Euronext businesses will allow us to dramatically accelerate the growth of our value proposition; plus deliver software and services into a much broader customer base.”

“By leveraging Wombat’s low latency market data solutions, we’ve been able to accelerate the build-out of our global electronic trading and risk capabilities,” said Rohit D’Souza, global head of Equities and Alternative Investments at Merrill Lynch, which owned a minority equity stake in Wombat prior to this transaction. “With quote and trade traffic ever increasing, sub-millisecond latency combined with the ability to process this data in real time is important for next generation trading systems,” he added.

Larry Leibowitz, NYSE Euronext Head of Global Technology, added, “Consistent with our goal of providing the best-of-breed technology products for electronic trading, we have now added the market-leading platform for high-performance data management and distribution. By integrating Wombat’s sophisticated data platform with TransactTools’ leading connectivity and messaging infrastructure, we’ll be able to offer customers a very efficient end-to-end solution to access markets globally.”

Solutions will be delivered both as enterprise software products and as managed services on the NYSE TransactTools Secure Financial Transaction Infrastructure (SFTI) network, ranging from hosting co-location for high-speed trading, direct market access (DMA) connectivity and algorithmic execution, and new data products such as integrated and consolidated price feeds. This will significantly reduce the cost and complexity associated with building and managing connectivity for electronic trading.

The NYSE Euronext acquisition of Wombat provides for a number of additional synergies, benefits and opportunities:

* By adding market-leading data management software to NYSE Euronext’s array of commercial products, the company will be able to integrate and link the messaging and data platforms to offer new solutions for smart order routing, risk management, DMA and other applications;
* Customer solutions will be delivered as enterprise software products or as managed services on the NYSE TransactTools SFTI network, yielding a more accurate and faster-turning feedback loop on customer needs;
* Customers will be offered efficient ways to monitor and control their data use and support their administrative tasks;
* By providing efficient, low latency solutions in high volume data environments, customers will gain improved access to increasingly fragmented, high speed and electronic market models which are emerging as a result of regulatory changes such as MIFID and Reg NMS;
* This comprehensive suite of products and services will serve to eliminate cost and complexity associated with building and managing connectivity for trading and market-information infrastructures.

Wombat, which was founded in 1997 and has offices in the U.S., U.K. and Japan, is an industry leader in high-performance ticker plant and electronic trading infrastructure solutions. The company offers a high speed market data and messaging platform with direct connection to markets that facilitates large volume, low latency data management and integration. It serves over 100 customers worldwide including all top 12 of the world’s largest financial institutions and currently employs approximately 140 people. In 2007, Wombat’s revenues grew 124% to $28 million, with EBITDA margins in excess of 35%.

As an employee here, it’s pretty exciting to see this strategy being fleshed out: helping customers access liquidity and information across all markets and products around the world.

There’s just one fact omitted from the news release: Wombat would be a pretty good name for a rock band.

Have a great week, folks. A little historical trivia to jump-start your Monday:

Today in NYSE History
14 Jan 1790 — Secretary of the Treasury Alexander Hamilton issued his “Report for the Support of the Public Credit,” proposing to pay the national debt through the sale of government bonds.

Those bonds were among the first instruments traded on what would later become NYSE. They also became a financial cornerstone of America’s early stability, growth and prosperity. Hamilton was a genius.

This announcement might not get a lot of attention, and I understand that — there’s a lot of other things going on and rumored to be going on these days. But I think it’s important, nonetheless:
NYSE Euronext Appoints Todd B. Abrahall and Michael J. Rutigliano as Liaisons to NYSE Specialists and Brokers
– Both Will Help Advance NYSE Equities Market Model – (NYSE.com).

NYSE Euronext (NYX) has announced the hiring of Todd B. Abrahall as Vice President, Specialist Liaison; and Michael J. Rutigliano, Vice President, Broker Liaison. Each will be responsible for helping to advance the New York Stock Exchange equities market model and serving as liaison with the NYSE specialist and floor broker communities, respectively.

Mr. Abrahall, who will work with NYSE specialists, also will lead the discussion with regulators concerning transforming the NYSE market model into one featuring more value-added participation by specialists. Prior to joining the NYSE Euronext staff, Mr. Abrahall was president of Susquehanna International Group’s NYSE specialist operations, overseeing the firm’s unit on the NYSE trading floor.

Mr. Rutigliano, in addition to serving as liaison with NYSE floor brokers, will lead efforts by the NYSE to bring greater opportunities for the agency community of the NYSE trading floor to demonstrate their continuing value to customers. Before being hired by NYSE Euronext, Mr. Rutigliano was managing director of WJB Capital Group Inc., overseeing the firm’s operations on the NYSE trading floor. He is a past president of the Organization of Independent Floor Brokers.

“Both Todd and Mike are well respected by their constituencies and have years of battle-tested market experience. Having them advocate for their constituents both inside and outside the NYSE will be instrumental in putting forward the NYSE market model in its primary role – that is, serving the needs of its customers,” said Louis G. Pastina, Executive Vice President, NYSE Operations, to whom both Messrs. Abrahall and Rutigliano will report.

To me, this underscores that specialists and floor brokers continue to be important parts of the NYSE market. We’re investing in the trading floor, not walking away from it. Todd and Mike know the issues, and I’m confident they will help us — and customers — realize the full value of our trading model. Welcome to the team, guys.

Who’s right about the history of the Dow Jones Industrial Average: Dow Jones or…Dow Jones? This post is much ado about something trivial, so stop reading if you want, but please indulge me if you will.

Historical typo alert: WSJ.com says today that the Dow first closed above 2,000 on Jan. 9, 1987:

Financial Flashback
January 9, 1987
The stock market’s New Year’s rally carried the Dow Jones Industrial Average to its first close above 2000. It closed at 2002.25, up 8.30. The industrial average had settled in a range of 500 to almost 1000 for about 20 years.

As mentioned on Exchanges yesterday, NYTimes.com said the Dow closed at the record milestone on Jan. 8 of that year, not Jan. 9.

Ironically, another Dow Jones site, DowJonesIndexes.com, agrees with the Times. On that site, which I’ve always found to be a terrific reference, both the Dow Data page and the Index History finder say it happened on Jan. 8.

Like I said, much ado about a bit of historical trivia, but these are the kinds of things that get referenced here and there, by people like me. And it’s so seldom that I spot a mistake that isn’t my own!

Just before hitting the “publish” button, I was thinking: maybe the WSJ.com mention is a reference to what the Journal reported that day, i.e., that the average hit a record the previous day? If so, it oughtta be edited; it doesn’t read that way.

I never cease to be amazed by how blogs — even this little one — travel via the ‘Net to places around the world. My post about Linux was picked up by an obviously techie blog in another language (text below). Please forgive my ignorance, but can anyone identify the language or summarize their post? Looks like they’re happy we’re using Linux, but that’s as far as I can get. Thanks.

05 јануари 2008
Стојанче Димитровски
NYSE пингвинизирана.

Само што разбрав дека NYSE (New York Stock Exchange), една од најголемите берзи во светот, ќе користи Linux! Уау! Хмм… а нашата 12-годишна берза што користи?

We favor Linux for what we do. We don’t want to be beholden to any one [hardware or software] supplier, even if it is very good. We want the freedom to be vendor-independent, so Linux was a good choice

Само напред!

од Act1v8 на 05 јануари 2008, 22:06

Happy Tuesday, folks. A little historical trivia for you:

On This Day (NYTimes.com):

1935 – Elvis Presley was born in Tupelo, Miss. Long live the king. Today is also the birthday of Robbie Krieger of the Doors, 62; David Bowie, 61; and American financier Nicholas Biddle (1786-1844).

1987 – The Dow Jones industrial average closed above 2,000 for the first time, ending the day at 2,002.25.

Later that year — most notably, Oct. 19 — the DJIA would move in much less positive but much more memorable fashion, I’m sure you’ll recall.

Financial Flashback (WSJ.com):

January 8, 1986 — Investment advisers averaged a sizzling 33.2% return on their stock picks last year, with top results coming from portfolios that centered on broadcasting, financial and consumer stocks. RCA paid off after its GE merger.

As you have heard, NYSE MatchPoint has received approval from the SEC to operate afterhours and intraday matching sessions. A few key points for everyone about MatchPoint:

1) It is a completely non-displayed trading facility of the NYSE.

2) It is the only exchange facility that is designed for both portfolios (lists of orders) and large block orders.

3) Its point-in-time operation aggregates multiple block orders per issue into much larger block trading opportunities.

4) It will trade NYSE, NYSE Arca, NASDAQ, AMEX and other regional exchange-listed securities.

5) Go to www.nyse.com/matchpoint to learn more about it.

Here is Bill Janeway of Warburg Pincus, as quoted by Tim O’Reilly (via Paul Kedrosky’s Infectious Greed blog):

…as driven by the web more generally, the frontier between human and machine-decision making has become radically problematic. First, quantitative approaches in trading, pricing, valuation, asset definition vastly expanded the domain for machine decision-making. But then the humans struck back, by refusing to act like the mindless molecules that the models driving machine decison-making required. The self-reflective, behavioral attributes of human market participants is now driving back that frontier, requiring innovations in every aspect of financial market processes, beginning with techniques of risk measurement and risk management. When price is an inverse function of liquidity and liquidity is an inverse function of price certainty, the recursive loop can only be broken by human intervention and action.

I didn’t mean to imply with that headline that I’m bored with the man-vs.-machine debate, though we’ve discussed it pretty extensively as it relates to the NYSE Hybrid Market. Both Janeway and O’Reilly are new to me, and I’m glad I came across them on Paul Kedrosky’s blog. Both are as articulate as anyone I’ve read on the subject.

Still, I’m waiting for the debate to get to a different place: when will we focus on man *and* machine instead of man vs. machine? How can machines better work as tools to serve the interests of humans in financial markets? To think that we must choose between one or the other is, to me, a false choice. It’s fascinating to watch John Henry take on the machine, but we’ve been doing that for over a hundred years, it proves none too good for John Henry, and doesn’t get us very far down the track of progress. It’s time to get further down the track.

From the news release issued this morning:

The first NYSE MatchPoint matching session will be an after hours match at 4:45 p.m. that uses the official closing price of the primary market. Soon, matching sessions will be established during regular hours of the Exchange. The first will take place at 9:45 a.m., followed by matching sessions at 10 a.m., 11 a.m., 12 noon, 1 p.m., 2 p.m., and 3 p.m. The price of the intraday match will be the mid-point of the NBBO that is randomly selected during a one-minute pricing period. An investor may enter one portfolio of buy and sell/short orders, a single block order or multiple portfolios of buy and sell /short orders.

Investors that rely on index-based or model-driven trading and investment strategies will find NYSE MatchPoint’s portfolio-based capabilities to be a very effective trading tool. In addition, NYSE MatchPoint’s non-displayed, point-in-time approach aggregates individual block orders and increases the depth of the liquidity pool and enhances the opportunity of a natural match.

When head MatchPointer Jim Ross has a minute, I’ll ask him to get back on the blog and give us an update.