A FIRM OF MANY MOVING PARTS.

It has been a busy year as SunGard further expands its reach into equity trading. Clive Pedder, Chief Executive Officer of SunGard’s global trading business for London and Northern Europe discusses the seamless integration of recent acquisition, GL Trade.

What is the history of SunGard global trading?

About 14 months ago, SunGard acquired GL Trade, a global financial software solutions company. The rationale was to give European buyside firms better access to SunGard’s trading product suite and allow SunGard’s US buyside clients to tap brokers in Europe and Asia. This is because the users of SunGard’s existing trading tools were predominantly US buyside firms, while GL Trade’s client base was more heavily weighted to the sellside in Europe and Asia. GL Trade itself was also a product of several acquisitions over a long period of time but the company had reached the point where in order to move to the next level, it had to either go through a leveraged buyout, private equity type of transaction or be sold to a trade buyer. We all agreed that SunGard was the best option because of the entrepreneurial spirit and mindset.

How has the acquisition progressed?

I can honestly say, and I have been through several acquisitions, that this has been one of the smoothest integrations. We did have some overlap but we decided to combine the best of breed wherever we could and develop a common sales and distribution team for the products. The result has been a combined global trading business that delivers a consolidated offering across equity trading, market data, exchange traded derivatives, trading and risk management. We offer multi-asset, front-to-back trading solutions, including order management, advanced execution, smart order routing, clearing and settlement, as well as market connectivity and information services.

What has been the impact of the financial crisis on the business?

Broadly speaking if you look at the current environment, the financial crisis is still occurring to a large extent and the result has been a greater focus on integration, cost efficiency, innovation, risk management and better internal controls. There is no doubt that it is a much tougher business environment, but the group is extremely resilient and we have held our own. In terms of trends, what we have seen in an increased focus on exchange traded products and a shift away from OTC derivatives and more exotic instruments.

What do you think about the debate about high frequency traders?

There is nothing new about high frequency trading and I do not think that the practice is wrong. I cannot think of any market failure or regulatory transgression that these traders have caused by being in the market. They exploit inefficiencies and have injected liquidity into the markets to the benefit of the end investor. It is understandable though that regulators are cautious and wish to better understand the model and the impact it could have on the markets.

There is also a great deal of discussion around sponsored access and DMA in the EU and the UK. I do not see a great deal of difference and in fact sponsored access can be seen as an extension of DMA. Although one or two exchanges have raised objections, I think again there needs to be a better understanding about what sponsored access is and who is using it. It is up to the brokers to undertake the due diligence around the firms they are sponsoring. If they do not and there is a problem then it will be their reputation on the line.

What do you think about the discussions around dark pools?

Again, dark pools are not a new phenomenon. Brokers and banks that are a significant size have been internalising as much flow as possible for a long time. They would be foolish not to as it benefits the end investor. Regulators in Europe, the UK and US are concerned about the risks they pose to market transparency and integrity, but I think we will see more venues coming onto the market.

Do you then think there is room for the new venues coming onto the market?

The MTFs that have been launched under MiFID have created price and liquidity competition to the established exchanges. However, I do not think such a high level of fragmentation is sustainable. It is not viable to break liquidity into so many pieces and this presents a challenge for brokers seeking “best execution,” as defined by MiFID. Today there are five main market participants – LSE, Chi-X, Turquoise, BATS and NASDAQ OMX – but there are new venues coming onto the marketplace. The future success, though, depends on their ability to attract sufficient flows. Chi-X has the advantage of being an early mover and a lot of liquidity has stuck, but it may not be that easy for the newer players.

What are some of the challenges you see for the banking and broking community?

I think the market will split even further between the top tier players and the boutiques, with the mid-tier firms facing the greatest challenges. This is because in order to fulfil MiFID obligations and to ensure best execution, brokers have to be able to connect to as many multiple markets as possible. The larger firms have the depth and breadth of resources and technology to access all the liquidity pools while the niche firms are able to focus on a narrow slice of the market. Those in the middle may not be able to afford to do this, which means they might have to give up their flow to other brokers.

What is SunGard global trading’s plans for the future?

In Europe, the biggest challenge is keeping up with the uncertainty in terms of markets and merger and acquisition activity in the industry.

The other issue is not to let the focus on cost stifle innovation and development. It is important to continue to launch new products and sharpen your competitive advantage. For example, this past summer we launched Assent ATS, an alternative trading system in the US that aggregates US equity trade flow from users of SunGard’s Assent, Brass and GL Stream trading solutions. This was a natural extension of our Assent product that offers brokers DMA as well as liquidity-seeking algorithms to help access fragmented liquidity across asset classes and major markets.

We are also aiming to harmonise and consolidate our complementary offerings around market data delivery, which includes MarketMap – which grew out of a company called Infotech that was acquired by GL Trade in 2007 – as well as FAME. MarketMap offers real-time and delayed data from multiple global exchanges and OTC sources while FAME provides a variety of real-time market data feeds and end-of-day data.

Clive Pedder, chief executive, London Northern Europe, SunGard Global Trading, joined SunGard through the acquisition of GL Trade. Prior to GL Trade, he was CEO of a number of global businesses within Misys Banking Systems. His earlier career spans several general management positions within the financial technology sector.