The vendor is breaking into the middle and back office markets with a mobilized OMS and a data management platform.

Eze Castle Software is broadening the reach of its eponymous order management system (OMS) via an app for the Apple iPad tablet computer and by adding middle and back office functions—more proof that the vendor foresees major opportunities beyond the front office. “We see that the role of the middle office is getting more complicated—increased regulation requiring more transparency, the new Swap Execution Facilities (SEFs) and clearing venues [for OTC instruments],” says Rob Keller, CFA, managing director of global product management at Eze Castle Software, which is a ConvergEx Group company. “The middle office is going to become more and more important. We’re seeing that as a big opportunity.”

A new respect is emerging for the middle and back offices, says Philip Lawton, a senior analyst with research firm Aite Group’s Institutional Securities and Investments team.

“Operations are more and more important to effective asset management—not only for investment decision-making but also for risk management purposes,” Lawton says. For instance, a securities firm cannot monitor its counterparty exposures across the firm unless it knows which counterparties it is working with, and what each of its trading desks has put in place with them. “That has to be done nightly, if not on a real-time basis.”

Customer demand for just such operational coverage and competition from third-party niche players “filling a void” are spurring on Eze Castle Software, Keller says. “Historically, we didn’t provide [middle office support] so customers were going to third-party vendors. Our clients are clamoring for it, so we’ll continue into the middle office space. Over the next 12 to 18 months, you’ll see us release more reconciliation support and more functions for post-trade operations.”

The additional middle and back office capabilities will help firms sidestep the inefficiencies that arise from the strict segregation of OMSes from middle and back office platforms. “We’re starting to build some of that capability into the OMS, so that firms do not have to hand off an operation among two or three separate applications,” Keller says.

Yet the walls established between front, middle and back offices were set up to protect the integrity of trading data; mobile technologies have the potential to facilitate security breaches. Keller says Eze Castle Software is well aware of this potential drawback.

“When we first started the project, we surveyed a bunch of clients that have been asking for enhanced mobile technology,” Keller says. “One of their biggest concerns was data and data security issues. We went out of our way to make this as secure as possible on the iPad. We recommend a VPN deployment and mandate SSL encryption. Users have to authenticate with a centralized server in Massachusetts to make sure they are valid.”

Keller adds that no data is kept locally on the tablet’s internal storage. “It’s all done via random access memory (RAM). Thus the system will wipe itself clean as soon as it closes or at an interval chosen by the client. … That was a big focus for us to make sure that customers’ client data, especially their holdings, which is some of their most proprietary data, was as secure as we could make it.”

With its initial release, the Eze Mobile iPad app for the Eze OMS will be offering built-in workflow that targets compliance officers on the go, Keller says.

“The compliance department will get alert notifications either through email or the iPad app about the pending violation,” Keller says. “A compliance group can leverage this application to approve or decline violations. … The compliance officer can access the application to review the transaction and the violation and approve or decline it. They don’t have to be tied to their laptops or desktops. They can take part of what they do on day-to-day basis and make it more mobile.”

Compliance managers can also remotely manage restricted lists of brokers, securities, or other monitored trade attributes. Future versions of the Eze Mobile iPad app will be able to let end users review transactions and release transaction details as needed.

“This is for orders that are complete on the day but need to be sent downstream to the back office for verification,” Keller says. “We’re building workflows into the iPad app so that users can be at home, on the road or on the train but can initiate those operations that are typically done from the user’s office desktop.”

In addition, Eze Castle Software will be offering with the iPad app the ability to review data exceptions, which would be typically done onsite, Keller says. But this will allow users to review exceptions and assign them to various users that can remedy them. “They will also be able to perform end-of-day operations from the iPad app.” Eventually, end users in the middle and back offices will be able to send instructions to the OMS to prepare themselves for the following trading day.

“Historically, we didn’t provide [middle office support] so customers were going to third-party vendors. Our clients are clamoring for it, so we’ll continue into the middle office space. Over the next 12 to 18 months, you’ll see us release more reconciliation support and more functions for post-trade operations.”

 —Rob Keller, managing director of global product management at Eze Castle Software

 

The iPad app is not Eze Castle Software’s first foray into realms beyond the front lines of trading. “Our biggest initiative, from a development perspective, has been the data management offering,” Keller says.

The vendor released the first version of Eze Data Management earlier this year, which includes a golden copy reference data manager and performance data aggregation solution. “This provides a central security master that sits between the back and front office systems,” Keller says. “You have one point of entry, one golden copy, and workflow built into it to be able to update upstream and downstream systems. The upstream systems only need a subset of data. Similarly, the downstream systems need a somewhat different subset of data. The data superset would reside in the middle office and that’s the piece we have built into the OMS.”

The performance data features allows Eze Castle “to take back office data, such as   returns data, and aggregate that over time so that users can build reports on top of it [that focus on] contribution analysis, investor-based reporting that says the performance of this fund over the month has been missed,” Keller says. It also helps customers focus on sectors and strategies that are performing well. “A lot of that is also being built into the order management system.”

Keller says that Eze Data Management is “Asset Control-Lite,” in reference to the data management provider, because while it does not offer all of the services of Asset Control, it offers golden copies for security master reference data and performance data. It can also extract data from single or multiple accounting sources and store it. “These are the first two modules in our data management offering,” he says. “From there, we’ll be building out more modules based on the requirements coming via regulators and demand from clients.”

In response, Asset Control’s president and CEO Phillip K. Lynch, says that he is not surprised that Eze, “with whom we have a cooperative and highly respectful relationship over many years,” is comparing its new capability to the “market leading solution—they’re clever guys. I am not necessarily flattered by it, however.”

Data issues are prevalent, and a key source of inefficiency, risk, opacity and excessive costs that Eze Castle Software and others are seeing firsthand, Lynch says.

“Effective data management, like order management, requires specific and deep knowledge and IP [intellectual property] which we have developed over decades of meeting customer needs the world over,” Lynch says. “We have invested tens of millions of euros in developing and refining our offerings, and worked closely with customers and partners to provide innovative solutions to a broad range of business and data issues, from reference data, to pricing, to credit and counterparty data for a wide range of leading financial institutions and information providers.”

Asset Control has developed feeds from more than 40 of the more common data sources around the world, and supports the complex information needs of multiple systems, including risk management, accounting, performance management, clearing, settlement and trading, Lynch says.

“Each of these systems requires data in a specifically tailored way that is fit for purpose,” Lynch says. “I would think Eze is looking to add value for its customers who have fairly narrow data management needs, which have traditionally been solved by tactical proprietary developments. But for customers who view data as a strategically important asset that needs to be accurate, broadly accessible, and truly actionable across the entire trading and investment process, customers will continue to rely on best-of-breed, fully tested, proven, and globally supported solutions like ours.”

Asset Control will continue to work collaboratively with Eze Castle Software “to serve our mutual customers,” Lynch says. The two will “maintain a very open dialogue and constructive relationship. Frankly, I think we are two highly complementary, customer-centric firms.”

Keller says Eze Castle Software has every intention of continuing its work with Asset Control and other major players such as Eagle Investment Systems and Netik. “We also see an opportunity for us to bring our own solution,” he adds. Eze Castle Software has no intention of slowing down the development of the Eze Data Management system and the mobile, middle and back office extensions for its OMS.

For the iPad app, the next phase will be come by the middle of 2012, Keller says. “This is version 1 and we’re by no means going to stop there. The adoption of tablets is ramping up very quickly. We’re getting a lot of feedback on the current version and they’re looking for additional functionality.” Updates could happen faster “if we get more demand for certain parts of [the iPad app],” he adds.

The advances “won’t be perfect for all clients but we’re building for the majority of our clients,” Keller says. “We see that as a big opportunity with the proliferation of different instrument types that require new attributes or just new regulations. To be compliant, firms have to have something that’s fairly nimble in the middle office to be able to transmit data in certain formats to various destinations.”

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