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Madoff Shifts from Proprietary FIX engine to Cameron Systems

Market-maker Bernard L. Madoff Investment Securities is replacing its home-grown FIX engine with an off-the-shelf system from Cameron Systems, signaling a coming wave of sell-side replacements.

Bernard L. Madoff Investment Securities replaced its in-house proprietary Financial Information Exchange (FIX) engine with Cameron Systems' FIX protocol engine to connect with brokers, networks and service bureaus.

Madoff, a New York-based market-making firm in U.S. equities has been migrating clients off the proprietary FIX engine and onto CameronFIX since November.

"What we wanted to do is gradually move legacy applications off proprietary operating systems and platforms," explains Liz Weintraub, Madoff's head of information technology. Madoff is running the CameronFIX engine, which is 100 percent written in Java, on a Stratus FT server, which is a Windows-based product.

Rather than building from scratch again, the firm decided to look at commercial FIX engines. "Instead of reinventing the wheel, because there were so many FIX-enginevendors there, we (decided to) take a look at them," says Weintraub. Though the head of IT declined to name the networks or service bureaus it is connecting to, sources say that Radianz, Transaction Network Services (TNS) and Savvis are examples of networks carrying FIX messages, while ADP, Beta, SunGard Brass, and SunGard Transaction Network, are the major service bureaus that transmit FIX messages from brokers to market makers as well as exchanges and electronic communications networks.

With the old FIX engine, it took Madoff two weeks to bring new customers into its testing environment, and with CameronFIX it will take one day. "We used to have to basically create a new software interface to each client. This just allows us to add one," says Weintraub. Martin Koopman, Cameron Systems commercial director, says the company provides a building-block approach so out of the box, customers using the modular sections of code can put the FIX engine in to suit their particular environment. "That flexibility has worked as the protocol has gotten more complex," he says.

According to Tim Lind, senior analyst at TowerGroup, this could be the start of a sell-side FIX-engine replacement-trend. "I think you'll see some renaissance now in the FIX-engine market driven by sell-side firms replacing proprietary FIX engines they've had for the last six or seven years," says Lind. "We're looking at the renewal cycle now," he adds, predicting that there will be a wave of sell-side firms looking to replace FIX engines this year because "maintenance is becoming untenable." Also, sell-side firms are stressed by having to support multiple versions of FIX and to adjust to every new instrument or capability that FIX supports, he says. Madoff supports three versions: 4.0, 4.1 and 4.2, says Weintraub.

"FIX 4.4 tests the patience of developers, which includes new applications of FIX to fixed-income products. There's also talk of extending FIX to process allocations, and talk of using it for foreign exchange, says the analyst. Because FIX engines are commodities now, the burden of proof is on the IT department to prove why it can't buy it off the shelf from a third-party vendor, he says.

Lind expects leading sell-side firms to pull the plug and look at replacing their existing FIX engines. "I think the FIX-engine market will be pretty buoyant in 2004," he says. Weintraub began evaluating FIX-engine vendors sometime last year. She only considered about three, she says. "We found Cameron quickly. "They were the new kids on the block," she says. We liked them and the migration is ongoing," she says Weintraub who did not name the other candidates. According to Lind, the largest players in the market include Solution Forge, B2BITS, Javelin under NYFIX, and Financial Fusion.

Cameron's price was also attractive. "Upfront, Cameron's price was much less than a lot of the other vendors," says Weintraub, but she declined to reveal the price. Lind says price depends on the client. A small FIX-engine installation could run $20,000, but a sell side firm would be paying well into the six figures, he says. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio

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