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Should ION and FIS be worried?

Just days after our column about Cinnober’s plans to move into the post-trade space with plans to take on legacy system giants, an upstart from Switzerland says it is ready, willing and able to do just that.

And then there were two.

Revendex, a consulting and IT firm based outside Zurich, says that its post-trade settlement system is ready to take on ION Trading’s Rolfe & Nolan system and FIS’s Stream (formerly GMI) platforms. Those two have dominated the post-trade space for decades, but Revendex executives say the systems are expensive, out of date and too slow.

Revendex’s managing directors Peter Hollenstein and Bernhard Kessler said their 14-person team has spent the past four years developing the system in-house. Now it’s unveiling the new technology, called primedex, a real time derivatives settlement system for listed and OTC markets. The new technology is interesting because it can be applied to just certain parts of the back office system without affecting other components. For firms that want to pitch the whole system, however, the technology provides a suite of elements to cover the back office needs, they say.

Revendex says it truly is real time post-trade processing that runs all day, not just in end-of-day batches. Its margin calculator works the same way. New exchange contracts are added automatically to the system, saving firms time compared to manually adding each new product.

The new Java and C coded system also runs on Linux technology. While that may be a yawn for some in the industry, many legacy systems are running on what are considered ancient technology platforms. Some of those engineers are no longer in the industry.

Revendex says its 4-year development and design process has created a product that is also cheaper than the systems that are out there because of the Linux design and other modern elements. A browser-based interface is in the works as well. How much cheaper is a matter of what each client needs, they say.

Revendex has little name recognition in this space largely because the firm evolved from a consulting firm into an IT firm as well. Its principals decided that the back office system space was well worth entering, as clients bemoaned the choices available.

So far, the firm has just two clients, Hewlett Packard’s financial services division and, last week, the firm signed its first bank, Berenberg Bank, the oldest bank in Germany.

But the competition is tough. ION and FIS offer more than back office systems to clients. They have invested heavily on front-, middle- and back-office systems over the years. FIS’ Stream, for example, boasts intraday margining as well, not to mention tools to help manage data, credit and other functions. Those firms have long-term contracts with customers as well, which makes Revendex’s challenge one of persuasion as well as patience.  

Revendex must overcome the “little guy” label too. They’ll also have to overcome the small firm risk for larger institutions which have to weigh the new technology versus the systems they know.

It is too early to tell whether Revendex, Cinnober or other challengers can grab market share in this sphere. But now we’ve got two newcomers in the arena who are ready to do battle.

When asked what the feedback from potential customers has been, Revendex’s Vanessa Kessler said, “They’re thrilled and happy. There’s somebody else out there.”

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Kharouf is CEO of John J. Lothian & Co. and editor-in-chief of John Lothian News (JLN). He edits the John Lothian Newsletter, MarketsWiki and MarketsReformWiki.