Acknowledging the rapid changes affecting Wall Street's technology requirements, trading systems vendor CSK Micrognosis Inc. is retooling its product mix to focus more on software than on data distribution.
Danbury, Conn.-based CSK Micrognosis provides software for the trading rooms of large financial institutions, including Citicorp; Barclays Bank PLC, London; Mitsubishi Bank, Tokyo; and Commerzbank AG, Frankfurt.
The changes to company's core business - real-time data distribution - are a result of increasing pressure from competitors like Reuters and Dow Jones.
The company "saw the writing on the wall," said Stephen Davy, an investment technology director with Barclays, so it began to focus more on software development, aligned itself with software companies, and expanded into securities-related consulting businesses.
"Technology today has moved more into the realm of the risk management component than the fundamental delivery of data," said Pieter Hamman, a vice president at CSK Micrognosis. "The original business that we were in had become more 'commoditized' if you will," he said.
Last year, CSK acquired Quay Financial Software Ltd., Dublin, whose software it had long marketed as with its own systems. In 1993, it acquired FD Consulting, a New York-based firm with 70 employees that specialized in financial services.
The purchases added nearly 200 people to Micrognosis' 450-member staff, bolstering its four-year effort to redesign its offerings to meet the explosive growth in trading room technology.
For years, brokers had been arming themselves with market data feeds from Reuters, Dow Jones, and Knight-Ridder, connecting with global and regional exchanges around the world, and getting links to other broker/dealers.
In the rush to install risk management systems, companies overlooked integration. As a result, foreign exchange, capital and fixed-income markets, money markets, and derivatives all ended up with separate systems.
Micrognosis officials said they now want to help their clients integrate these systems, and connect the burgeoning terminals and keyboards on traders' desktops.
By integrating and managing the data distribution, credit, and market risk of various operations from central management system, institutions can become more cost-effective, said Gerry Giblin, chief technology officer at CSK Micrognosis.
"We have a vision of what the proper solution to risk management in wholesale banking should look like," he said.
As part of its long-term efforts, CSK Micrognosis has unveiled +Risk, a system that began as a project between Quay Financial and Hambros Bank, London, in 1992.
Officials said the system is CSK's answer to the increasing competition from Reuters, Dow Jones' Telerate, and others offering new risk management components.
Mr. Giblin said the new system "manages all the risk faced by a bank on a consolidated basis."
"As people were starting to come out of the excesses of the 1980s, bankers said 'We'd better get more focused on our discretionary investments, where we are throwing our money, and understand what this exposure is on the off-balance-sheet,"' Mr. Hamman said.
CSK's other new product is called +Rates. The software is designed to help banks manage their use of data more efficiently by monitoring the various sources of incoming information.
Banks can end up paying for vast amounts of "superfluous data," Mr. Hamman said, particularly when employees subscribe to information sources unsupervised and then leave the bank. Bills for unused data feeds could then pile up for years, he said.
"I've seen serious problems in maintaining or controlling the cost for data distribution," said Octavio Marenzi, a technology analyst with the Wellesley, Mass.-based Tower Group.
Mr. Giblin said the +Rates system ensures "you are paying as little as you need for all the data you want."
He said the system can generate savings of about 20% or more. Large customers pay tens of millions annually for data feeds.