Exchange group Nasdaq OMX has boosted its technology capabilities following the completion of a deal to purchase FTEN, a supplier of real-time risk management solutions.
The acquisition will allow Nasdaq OMX to offer its members a suite of risk management solutions and allow FTEN to widen its customer base both in the US and in other continents. Financial terms of the deal were not disclosed.
Real-time risk management tools have become an important area of focus for US brokers following the recent banning of ”naked' sponsored access by national regulator the Securities and Exchange Commission on 3 November.
The ban requires broker-dealers with market access – including those who allow buy-side clients to use their identifiers to directly access the market – to install risk management controls and supervisory procedures to help prevent erroneous orders, ensure compliance with regulatory requirements and enforce pre-set credit or capital thresholds.
FTEN's solutions include RiskXposure, a real-time exposure monitoring tool and VelocityXpress, an ultra-low latency, high-frequency execution and risk control platform.
The firm was also recently awarded a patent in the US for a solution that uses data automatically generated by securities transactions – such as the drop copies created by exchanges to record individual trades – to allow live monitoring of trading activity no matter how high its frequency.
“We recognised early on that demand for pre-trade risk management tools would dramatically increase as the regulatory environment evolved and the need for comprehensive risk controls moved from niche to mainstream,” said Ted Myerson, CEO, FTEN. “The transaction with Nasdaq OMX gives us the ability to broaden the scope of customers we can reach in the US and tap into its international network of exchange partners.”
The acquisition will also be another blow in the battle between exchanges to offer market participants technology solutions as well as trading services.
Following the purchase of market data vendor Wombat in January 2008, Nasdaq OMX's main rival in the US NYSE Euronext, has built up a separate commercial technology division, NYSE Technologies.
The unit has so far rolled out technology solutions to the Qatar Exchange, Warsaw Stock Exchange and for the market linkage planned by the Association of East-Asian Nations.
Nasdaq OMX has taken a less aggressive approach than NYSE Euronext, but did purchase Australia-based market surveillance firm SMARTS in June 2010.
“FTEN’s customer base is comprised of some of the leading broker dealers in the global market and its offerings are the most comprehensive in terms of functionality, asset class and market spread,” said Eric Noll, executive vice president of transaction services, Nasdaq OMX. “As part of Nasdaq OMX, FTEN will be able to increase its penetration globally, greatly broadening its distribution network beyond the US to a worldwide solution, while expanding its US customer base.”