New Trade Idea Dissemination System Launched

By Maria Trombly | Securities Industry News | February 13, 2006

In October, youDevise, a London company specializing in on-demand technology applications for financial markets, introduced Trade Idea Monitor (TIM), a Web-based system that lets brokerages disseminate trading ideas to buy-side and money manager clients. Already claiming a considerable following among major brokerages, hedge funds and other asset managers in the U.K., youDevise unveiled TIM for the U.S. market on Feb. 1.

TIM comes free to the buy side and relies on an open-access utility, Repository & Distribution Centre (RDC), that enables secure, automated sell-side-to-buy-side communications regardless of the technologies used by the participants.

RDC was developed by Trade Ideas Ltd., a joint venture of Citigroup, Credit Suisse, Dresdner Kleinwort Wasserstein and Merrill Lynch, which contracted the software development to youDevise after competitive bidding.

"TIM converts the complex process of developing, sending, receiving, acting upon and then tracking a trade idea into a streamlined, automated process," said Colin Berthoud, youDevise's director of sales. "All this takes on added significance in light of new and proposed regulatory guidelines in the U.S. and U.K. for increased documentation and transparency of execution, research and other soft-dollar services paid for with commission charges."

TIM is the first commercially available product that taps into RDC; others are expected to follow. Alternatively, firms can link to the repository through application programming interfaces. "They've done a very good job on what they've developed and are ahead of the market," said one money manager who preferred to remain anonymous. "We're very happy."

Said Damon Kovelsky, an analyst with Financial Insights in Framingham, Mass., "I don't know of anyone else who is doing this." Berthoud said about 1,000 "authors and recipients" currently use the system.

Trade ideas are transmitted in an organized format, showing prices, dates, amounts and other data. Authors of an idea can also include attachments and other explanatory materials, but in their basic form the ideas can be acted upon and tracked, meaning that buy-side traders can compare ideas from different brokers or from the same broker at different times, and can see how much a recommendation earned them or could have yielded over time. The transmitters of ideas can even be ranked by their track records.

On the sell side, in addition to addressing compliance concerns about simultaneous distribution, the system allows firms to unbundle some of their services. "Investment managers are under increasing pressure in the U.K., and more recently in the U.S., to disclose the various expenditures they make," said youDevise managing director Richard Koppel. "This allows them to unbundle the package of services that the brokers provide."

The system also makes it possible for a fund manager to demonstrate to its clients that it is spending commission money sensibly, said youDevise advisory board member Barry Marshall, former COO of Gartmore Investment Management and now co-chair of FIX Protocol Ltd. for Europe, the Middle East and Africa.

To satisfy security concerns, Ernst & Young was hired to try to hack in, said Duncan Paterson, a spokesperson for the repository. He said that a broker cannot get access to the ideas of others. As for physical security, "It's actually housed in a nuclear bunker," he added. "And we have real-time replication and nightly off-site backup."