Trading Technologies (TT) has acquired equities and equity options technology provider TRAFiX, filling a significant gap in its expanding multi-asset platform and setting out a roughly 12-month path towards integrating the two firms’ trading technology.
The deal extends TT’s coverage into global equities and equity options through TRAFiX’s order and execution management systems (OEMS), FIX connectivity and APIs. These will sit alongside TT’s existing capabilities across futures and options, fixed income, FX and cryptocurrencies, as well as risk, analytics, surveillance, compliance and post-trade tools.For TT, the acquisition is intended to go beyond adding another asset class to its product range. The company plans to bring the two technology stacks together rather than operate TRAFiX as a separate business within a broader collection of products.
“I think it’s really the difference between what I would call a platform company and a portfolio company,” Justin Llewellyn-Jones, CEO of Trading Technologies, tells TradingTech Insight. “There are a lot of vendors in this space that acquire different companies, but you end up having to interact with those solutions very separately. Even though they claim to be multi-asset, you’re logging into half a dozen different systems to get that experience. That’s not our philosophy. TT is very much about being a platform, because we see traders increasingly wanting that multi-asset, cross-asset experience.”
Integrating without homogenising
The acquisition follows more than a year of discussions between the companies. TT had been hearing demand from its customers for equities capabilities, while TRAFiX customers were looking for access to futures technology.
TRAFiX brings more than 200 customers globally and connectivity to more than 100 trading venues, according to the announcement. Bringing the platforms together will require TT to accommodate the different requirements that have developed around individual markets.
“Over the last 30 years, I’ve seen vendors come into the market with multi-asset solutions that create a very generic layer of trading which isn’t really fit for purpose for any trader,” says Llewellyn-Jones. “There’s specificity around equities, futures and fixed income trading, so we’re going to be very thoughtful about how we integrate TRAFiX. The underlying technologies are very comparable, so it’s really about getting the user experience, the UI and the consistency of interaction right.”
For TRAFiX, the combination also changes the speed and scale at which it can broaden its offering. “For each of us to develop what the other already has, we’d miss tremendous opportunities in the marketplace,” says Walter Fitzgerald, co-founder and CEO of TRAFiX. “Bringing the two technologies together allows us to provide the products and services customers are looking for much more quickly, so time is a big factor. There are firms delivering global solutions by taking one system and cloning it to run in different regions, leaving four different systems supporting a global business. That’s not what we intend to do. We’re going to have one seamless platform delivering products and services to our customers.”
Beyond the trading desk
The combined proposition covers more than order and execution management. TT’s existing platform includes surveillance and compliance, trade reporting, algorithms, TCA and margin analytics, creating scope to apply the expanded asset-class coverage across other parts of the trading lifecycle. That broadens the potential audience for the integrated platform beyond individual trading desks.
“With margins shrinking and competition getting tighter, people are increasingly trading multi-asset as individuals,” says Michael Ottrando, head of sales at TRAFiX. “But the bigger picture is giving firms a truly multi-asset, real-time view from a compliance and risk standpoint. Today, you have a lot of disconnected systems – a system for futures, a system for options and multiple systems across different asset classes and regions. Having one global application that gives you a real-time view across everything from a trading, compliance and risk standpoint adds tremendous value to our customers.”
Changes in market structure are adding another dimension to the integration strategy. Trading hours are expanding across a number of markets at the same time as settlement periods are being reduced, putting existing technology architectures under different operational demands.
“There’s a lot of noise around 24-hour trading,” says Llewellyn-Jones. “Digital assets are already there, and FX has always been there, but we’re seeing more of it in equities, futures and fixed income. At the same time, settlement cycles are compressing. So the friction moves to integration. How do I get data between systems to maintain a real-time view of activity? How do I surface that data to my middle-office and post-trade teams, and get post-trade data back to the desk?”
Near-term opportunities
TT sees opportunities before the full technology integration is complete. Its existing global distribution gives TRAFiX a route into markets including Asia-Pacific, while TRAFiX brings a sizeable equities customer base, including around 150 clients that TT does not currently serve. TT also expects opportunities to bring its existing surveillance, compliance, trade reporting, algorithms and TCA capabilities into the TRAFiX client base.
The acquisition also gives TT a broader proposition for sell-side firms running both equities and listed derivatives. Llewellyn-Jones sees an opportunity among institutions looking to replace incumbent platforms but which need coverage across multiple asset classes before they can make that change.
The longer-term test will be the integration itself. TT is aiming to combine the platforms within roughly a year while preserving the specialised workflows associated with individual asset classes. The result would extend the consolidation beyond execution technology into a wider set of trading, risk and operational functions.
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