By Garvin Young
Brown Brothers Harriman’s Garvin Young explains the decision to adopt a Software as a Service (SaaS) trading system in lieu of traditional on-site architecture.
In its capacity as a global custodian, Brown Brothers Harriman (BBH) takes a holistic view of its trade execution process. This view includes front-end connectivity and execution, all the way through to settlement. The firm continually assesses the current and future needs of its clients to ensure that its products and solutions fully meet their requirements.
In late 2010, given the rapidly changing landscape of the brokerage industry related to connectivity, regulation, algorithms and back-office efficiencies, we initiated a RFP process to identify an order management system that could best position its clients for the future.
Specific details of the project included a buy versus build analysis, cost/resource considerations, client retention rates, etc. Given the timeframe that we had set for implementation, it became clear that a build-from-scratch solution would have been both costly and impractical. Such a solution would have required BBH to add staff, incur IT spend, expand occupancy space, and bear significant ongoing maintenance costs.
Through the RFP process, we looked for a provider with a reputation for stability. In an environment of microsecond execution, an OMS must be reliable, stable and flexible. The ability to customize the solution was also important. The solution had to include a robust front-end while also keeping with BBH’s requirements of high-quality middle- and back-office processing. Our integrated execution and settlement product required a solution provider with strong expertise around maintaining high straight-through processing levels and real-time client reporting.
As a privately held organization, BBH maintains a high focus on risk management, which meant that a strong track record of regulatory reporting and risk management tools was also critical. The firm’s global and sophisticated client base has complex connectivity requirements, such as Reuters, Bloomberg, ULLINK, SWIFT and virtual private networks (VPNs), to name a few. Further, its clients have specific FIX tag requirements and run multiple versions of the FIX Protocol. We required a solution that was able to meet all these demands.
Identifying the Right Provider
BBH narrowed the search to six top providers of equity execution platforms and went on to select Fidessa. BBH’s Investor Services clients recognize us as a leader in technology solutions, with the capability of offering them a sustainable, long-term and flexible solution that allows them to access new markets to grow their business. We determined that their platform aligned well with these needs, and offered an ideal complement to its existing proprietary solutions.
Fidessa is a provider of high performance trading, investment management and information solutions for the global financial community. We particularly liked the robust capabilities in their core execution platform, including its extensive global markets coverage, product stability and configurability and, importantly, a willingness to partner with BBH to customize the platform to its specific requirements, including integration with our proprietary back-office applications.
Migrating with Success
Having selected Fidessa, we performed a thorough evaluation of two of their three operating platforms, Enterprise (self-hosted) and SaaS (Fidessa-hosted), and finally selected the SaaS model1. High performance, the overall ease of implementation, the ability to easily onboard new clients or markets and the clear level of control and monitoring over the hosted environment were all factors considered in this decision.
We worked closely with the Fidessa team to create an implementation plan that thoughtfully managed the risks inherent in a platform conversion while making the conversion assmooth as possible for clients. A controlled and phased transfer was adopted, consistent with our risk management policies, with individual client migrations being scheduled based on factors such as volume, connectivity network, and trading profile.
The migration approach involved running two systems simultaneously. We looked at client trading profiles, connectivity requirements and internal reporting to categorize clients into several tranches. Once a tranche was established, clients were migrated over one at a time depending on their test results. The conversion schedules increased with the success of the first few client migrations. Once connectivity and the downstream processes were verified the last phase involved managing clients with open orders.
The BBH Systems development team performed a total redesign of its internal mainframe to accommodate the interface between Fidessa and its back end processing systems. This included redesign, coding, regression testing, upgrading servers, ordering multiple T3 lines, business continuity planning and stress testing. As a global custodian to many of its execution clients, BBH automates the execution process along with the settlement so it was imperative that this process delivered the same high quality service that its clients are accustomed to receiving.
Thanks to the close collaboration between BBH and Fidessa, we are happy to report that we have now successfully migrated 99% of our clients to the new platform with minimal client disruption. The SaaS platform has, so far, proved to be extremely stable during the most recent period of high trading volume and volatility.
1 The third is managed enterprise – Fidessa hosted, self-directed.
By Garvin Young