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What Does the Sale of Eze Castle, RealTick OMS/EMS Platforms Mean for the Buy Side?

In spinoff from ConvergEx, Eze Castle OMS and RealTick EMS will soon have a new financial backer, TPG Capital, focused on software. Will this impact buy side clients?

Buy side customers of Eze Castle and Realtick software platforms won't see any difference when the popular OMS/EMS business of ConvergEx are sold to private equity firm TPG Capital.

"Initially, it's status quo," said Tom Gavin, CEO of Eze Software Group, the new unit housing Eze Castle LLC and RealTick LLC businesses along with Tradar, a U.K.-based portfolio accounting system, whose acquisition was in progress at the time the divestment was announced.

"The structure at ConvergEx makes this a relatively easy carve out," said Gavin in an interview with Advanced Trading today. About a year ago, the order management system (OMS) and execution management system (EMS) businesses were transitioned to a new internal software platforms group. "We were taking Eze Castle, RealTick and the acquisition of Trader and rolling them up into this group," said Gavin. After the sale of the trading software platforms to TPG, Eze Software Group will consist of three business units: Eze OMS, RealTick EMS and Tradar portfolio accounting engine, an acquisition that is already underway.

With all the software businesses in the same group, "This allowed us to take a self-contained structure within ConvergEx, just click it out and complete the deal," he said. Once the deal is finalized, the platforms will get a new financial-backer focused on software, while ConvergEx will focus on its execution business. ConvergEx can "double down on its investment in tech-driven execution business," he said.

"So initially out of the gate, nothing changes," said Gavin referring to the impact on asset managers and hedge funds that use the software platforms.

On Wednesday, ConvergEx Holdings said it signed a definitive agreement to sell the popular software platforms to an affiliate of private equity firms TPG Capital. According to media reports, ConvergEx was looking to sell both OMS and EMS platforms for as much as $1 billion. However, financial terms of the deal were not disclosed.

The sale allows the firm to have a "pure software business with new financial backers helping us to build the software business," said Gavin.

TPG Capital, a global investment firm with $54.5 billion in capital under management, owns stakes in SunGard Financial and LPL Financial Services, among other financial companies, based on its portfolio holdings listed on its web site.

Going forward, Eze Castle OMS and RealTick EMS will continue to be sold as standalone products, but the new ownership will allow it to put resources in place for tighter integration, said Gavin. Coining the term "flexible front-to-back," to describe the long-term strategy, Gavin said the idea is that products can be sold standalone and also be sold on a tightly integrated package basis, with enhanced hooks to third party systems as well.

"You'll be able to do things with the RealTick EMS and the way it will interact with the Eze Castle compliance engine," he said. Citing advantages of the new structure, Gavin said, "There will be levels of integration by virtue of being under one roof and same structure, and the planning process will be aligned under one group."

Prior to setting up the SSG, Cogent Software, a commission management product acquired by ConvergEx, was operating independently. A year ago, Cogent was integrated into the Eze team, which also had commission management capabilities, and now there is one combined roadmap with Eze, he said.

After the divestment occurs, Eze software products will continue to interact with ConvergEx's execution business. Under Convergex the software products had a high degree of autonomy and a high level of cross selling, said Gavin. "The synergies that exist between execution and software can still exist," said Gavin. Institutional clients will still be able to utilize 'soft dollars' and use ConvergEx as a distributor of RealTick to the buy side clients. 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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