GL Trade connects to Onexchange

GL Trade, a provider of exchange connectivity, is to connect its front-end trading platform to electronic market-place provider Onexchange to allow its clients to create and clear over-the-counter and exchange-traded derivatives instruments in real time.

The alliance will target futures clearing houses, derivatives exchanges and futures commission merchants, which in some cases might already have an independent software vendor relationship with GL Trade.

GL Trade already offers access to Liffe Connect and the Chicago Mercantile Exchange’s Clearing 21 modules via an API and plug-ins, Onexchange chief operating officer Ed Cuoco said.

Onexchange hopes to create a new category of customisable OTC derivatives that can be created and cleared in real time, with snapshots of current positions always available. Clearing is typically a batch process that only divulges updated positions periodically, Cuoco said. Firms can use Onexchange’s snapshots and pipe the data into their risk analysis software at any time, with the confidence that their positions are always updated.

Onexchange and GL Trade’s venture comes at a busy time in the futures market, with a Brokertec-Board of Trade Clearing venture announced and the Euronext-Liffe acquisition unfolding. But Cuoco claimed that while exchanges have begun to "commercialise" their in-house clearing solutions for other exchanges and firms, their core technology tends to be of 1980s vintage, is mainframe-based and is buried under layers of other vendors’ products.

"Today, if you try to add a new product to a derivatives exchange, a lot of intermediaries have to make changes," Cuoco said. "If you add an OTC product or a new delivery instruction, that change can take months. Our system is multi-parameter based, because of Java, XML and FIX; what clients are getting is a shared data model of an instrument that can inherit behaviours throughout the system."

Onexchange is looking into running more services on FpML, the derivatives markup language, but there has "not been a tremendous amount of pull" from clients for the standard, Cuoco said.

The connections between the GL Trade screen and Onexchange will be invisible to the user, facilitated by TCP/IP connections over a virtual private network or the public internet, Cuoco said. The clearing software runs on a Windows NT platform on Sun Solaris machines, but Onexchange will be announcing support for other platforms, presumably including Unix, shortly.

Clients in the usability-testing phase do not initially have to purchase the thick-client server that communicates with Onexchange; rather, they can log in to a staging system on an application service provider model.

If the client does decide to take the service, configuration is necessary through the GL Trade front-end and the networking infrastructure on the back-end. This process can take up to several months. Onexchange will soon be announcing partnerships with network providers to manage these connections, Cuoco said.

The final product, for which development began in August, will be demonstrated at the Securities Industry Association Expo conference in Chicago on November 28-30, said Cuoco. Financial terms and clientele were not disclosed.

GL Trade executives were not available for comment.