Interesting article by Larry Tabb, CEO and founder of Tabb Group, in Wall Street and Technology magazine: NYSE TransactTools May Be NYSE Euronext’s Most Important Asset; NYSE TransactTools, a FIX-engine provider, could be the ticket to the NYSE’s survival. Excerpt:

So where does NYSE TransactTools fit into the equations? One of the critical factors driving flow to the largest brokers is IT. As electronic trading, algorithms, latency, speed and liquidity pool connectivity become more critical, the amount of technology needed to trade becomes more significant. The more expensive it is to acquire this technology, the more difficult it is for the small and midtier players to compete with the top brokers. TransactTools is one of the only firms that can change this equation.

Since everyone trading at the NYSE needs to be connected to SFTI (the only way to get to NYSE) and NYSE is connected to all other markets (a Reg NMS requirement), that means SFTI is the only network that literally connects all U.S. brokers, exchanges and ECNs. If TransactTools, via Wombat, can develop an effective, cost-sensitive hosting solution in the SFTI network, NYSE TransactTools can begin to bring down the cost of high-speed/low-latency market data needed to trade. And if NYSE TransactTools can embed low-latency transport, a set of flexible algorithms, a DMA/EMS platform, CEP and a time-series database into SFTI, NYSE TransactTools can begin to empower the midtier and smaller brokers that are quickly being shut out of the market.

Not to take Mr. Tabb too literally, but I think some of our other businesses could also lay claim to being our “most important asset.” Intangibles such as brand, reputation and credibility are also critical components of our future success. But his point is well taken. It’s clear that TransactTools and our other Advanced Trading Solutions businesses are becoming a core component of NYSE Euronext, complementing our existing markets, listings and data businesses and creating a new avenue for serving customers and growing our company.

Interesting article by Larry Tabb, CEO and founder of Tabb Group, in Wall Street and Technology magazine: NYSE TransactTools May Be NYSE Euronext’s Most Important Asset; NYSE TransactTools, a FIX-engine provider, could be the ticket to the NYSE’s survival. Excerpt:

So where does NYSE TransactTools fit into the equations? One of the critical factors driving flow to the largest brokers is IT. As electronic trading, algorithms, latency, speed and liquidity pool connectivity become more critical, the amount of technology needed to trade becomes more significant. The more expensive it is to acquire this technology, the more difficult it is for the small and midtier players to compete with the top brokers. TransactTools is one of the only firms that can change this equation.

Since everyone trading at the NYSE needs to be connected to SFTI (the only way to get to NYSE) and NYSE is connected to all other markets (a Reg NMS requirement), that means SFTI is the only network that literally connects all U.S. brokers, exchanges and ECNs. If TransactTools, via Wombat, can develop an effective, cost-sensitive hosting solution in the SFTI network, NYSE TransactTools can begin to bring down the cost of high-speed/low-latency market data needed to trade. And if NYSE TransactTools can embed low-latency transport, a set of flexible algorithms, a DMA/EMS platform, CEP and a time-series database into SFTI, NYSE TransactTools can begin to empower the midtier and smaller brokers that are quickly being shut out of the market.

Not to take Mr. Tabb too literally, but I think some of our other businesses could also lay claim to being our “most important asset.” Intangibles such as brand, reputation and credibility are also critical components of our future success. But his point is well taken. It’s clear that TransactTools and our other Advanced Trading Solutions businesses are becoming a core component of NYSE Euronext, complementing our existing markets, listings and data businesses and creating a new avenue for serving customers and growing our company.

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.

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.