Merrin Financial Unveils Intermarket Trading Network

Merrin Financial Inc. last week outlined plans for its Intermarket Trading Network (ITN), drawing together several of the product developments it has made over the past 18 months or so. ITN, segments of which are now operational, is aimed at creating electronic links between buy-side managers and traders and sell-side brokers for order routing and confirmation, asset allocation and portfolio management.

The vendor plans to link all of its current clients to ITN by the end of the year. The emergence of the ITN system accompanies similar activities by a number of vendors, among them Thomson Financial Services Inc.'s TORS/TOTS, First Boston Corp.'s Lattice and the Institutional Liquidity Network (ILN) operated by Fidelity Brokerage Inc.'s National Financial Institutional Services unit. It follows Merrin's gradual addition of links to data providers, portfolio management system vendors and brokerage firms.

Merrin used an April 22 seminar for potential customers from both sides of the Street to present its vision of the future. At the New York seminar, president Seth Merrin outlined plans for ITN and suggested how Merrin might fit with attendees' technology plans.

At the core of ITN is Merrin's Financial Trading System (MFTS), an automated trade processing system aimed at eliminating the use of paper trade tickets. Managers and traders can input trade details into their PCs or workstations. These are then forwarded to the firm's portfolio management or accounting system.

ITN will be accessed using the same DOS-based microprocessor used by MFTS customers. Merrin plans to port ITN--and MFTS--to Microsoft Corp.'s Windows platform by the end of the year. Six months after the Windows version is complete, the firm intends to finish an interface with Sybase Inc.'s relational database management system.

ITN links users of MFTS to broker/dealer execution systems or crossing networks, as well as to portfolio management and asset allocation systems. Inasmuch, it resembles Thomson's blueprint for its planned Thomson Order Routing System (TORS) and Thomson Order Tracking System (TOTS), which is aimed at providing links to Thomson's line of buy-side systems and to broker/dealers' execution facilities.

During last Thursday's presentation, Merrin said 15 brokers are currently participating in the ITN project. These brokers, which Merrin declined to identify, will provide routing facilities for equities only. Facilities for other instruments will be added later, Merrin says.

While Merrin is keeping mum about broker participants, it is known that the vendor previously had developed links from its MFTS system to the Posit crossing network operated by Jefferies & Co.'s Investment Technology Group (ITG) and to the Superdot interface operated by IBJ Schroder Bank & Trust Co.'s Execution Services Inc. (ESI) subsidiary.

Access to such execution facilities is one of a series of upgrades over the past 18 months that has made ITN possible. Last October, Merrin unveiled interfaces to a number of third-party portfolio management systems. At last week's seminar, the vendor claimed to have completed interfaces to portfolio systems from Advent Software Inc., National Investor Data Services (Nids), Security APL, Shaw Data Inc. and Thomson, and to the accounting/custodial system operated by State Street Bank & Trust Co.

Last fall, the vendor also added access to real-time market data services, which are used to monitor portfolio positions in real time. Currently, the system can receive real-time price updates from Automatic Data Processing Inc., ILX Systems Inc., PC Quote Inc., Reuters and Track Data Corp.

Last July, Merrin completed an interface to Thomson's Oasys electronic trade confirmation and asset allocation system. Thomson plans to link Oasys to its TORS/TOTS systems as well, but both vendors say it will be business as usual. "We made a bid for Oasys," Merrin jokingly told seminar attendees, "but they turned us down."

Aside from Thomson, Merrin is aware of possible competition from brokers' own systems, such as those being developed by First Boston and Fidelity Brokerage. But Merrin says ITN's independence from any brokerage firm will give it an advantage over Lattice and ILN.

He says ITN isn't intended to be a source of liquidity. Rather, Merrin's aim is to bring the buy-side closer to the sell-side, allowing them to make more efficient deals. "What we're saying is, don't take the human element out, rather use the technology to get closer."

According to Merrin, ITN is intended to enhance users' phone conversations, and to reduce unnecessary calls, such as those made to report asset allocation.

At the seminar, one attendee pointed out that there are several vendors trying to create rival networks and questioned whether the situation could ever evolve into a single network linking all the disparate systems. Merrin said the rivals eventually would likely cooperate. "No-one will gain from having a small slice of the pie."

Another attendee questioned the willingness of firms to invest in the technology that would be necessary to acheive true electronic trading. In response, Merrin asked for a show of hands. Both buy- and sell-side attendees demonstrated support for the concept.