Algemene Bank Nederland N.V. To Test Fx Feds Module Of Mantec II

Are traders willing to stop scribbling on paper and begin entering transaction details into a terminal?

That's the question the New York branch of Algemene Bank Nederland N.V. will try to answer later this month when it tests a foreign exchange trading system designed by Management Technologies Inc. (MTI) of New York.

ABN will be the first bank to try out the FX FEDS (Front End Dealing System) module of the new ManTec II product line, which runs on Stratus OLTP systems.

MTI finished work on FX FEDS in February and plans to launch it at the Forex 88 exhibition to be held May 23-25 in Hawaii.

ABN's New York forex desk currently uses ManTec, MTI's back-office system. Each time a trader completes a deal, he writes down the details on a slip of paper. This is immediately collected and entered into the system by back-office staff.

Not to be confused with ManTec II, ManTec runs on an IBM mainframe. Although it is primarily a back-office system, ManTec has been modified for front-end use through 3270 emulation at Merrill Lynch International Bank and Manufacturers Hanover Trust Co.

The foreign exchange module of ManTec gives real-time position information by currency, but not by trader. In addition to providing a breakdown of each trader's position, ManTec II allows traders to do "what if" analyses by simulating market conditions.

The FX FEDS module of ManTec II displays a trader's position, his credit limits with various counterparties and his exposure -- how much of each limit has been used. The system also allows a trader to see his daily delivery risk for two years forward.

Sam Halim, senior vice president of ABN, says the bank will license the FX FEDS module of ManTec II if the traders like it. "It all depends on whether they are willing to input the trades," he says.

FX FEDS passes deal information to ManTec and other mainframe systems using a one-way interface operating in real time. If the mainframe goes down, FX FEDS will hold all deals and amendments until they can be transmitted.

Theodore S. Feineis, vice president of ABN, says the bank chose ManTec because no other system has all its capabilities, though other vendors offer products similar to ManTec's components.

ManTec isn't just a foreign exchange trading system. It's a global risk management system that includes modules for money market instruments, commercial loans, demand deposit accounts, general ledger, and funds transfer -- both SWIFT and CHIPS.

Components still to be launched include credit management, precious metals, securities, swaps, financial futures and options.

MTI plans to develop ManTec II modules running on Stratus that complement existing and future ManTec components, says Barrington J. Fludgate, chairman and chief executive of MTI. Now that FX FEDS is complete, MTI has begun work on the money market module of ManTec II. Each ManTec II component will be available on a stand-alone basis or as a front end for ManTec or other back-office systems.

MTI decided to introduce ManTec II to meet the needs of smaller banks and branches of large banks whose volume is not high enough to justify a mainframe system. "We looked at PCs, which are fine for small trading operations, but the LAN begins to sag when you get any decent volume," Fludgate says. "We chose Stratus because of the fault-tolerance."

Before founding MTI eight years ago, Fludgate helped develop the Modular International Dealing and Accounting System (MIDAS) for Business Intelligence Services. BIS, which is now owned by NYNEX, and Hogan Systems are MTI's main competitors.

According to Fludgate, many banks are not equipped for globalization because they have separate front- and back-office systems that frequently are not able to communicate with each other. Another problem is the split between risk management systems for trading and lending.

Because branches often operate independently and may have incompatible systems, Fludgate says it's "hard for the treasurer to know what's going on all over the world."

With limited communications between individual profit centers, he says it's not unusual for a bank to trade against itself by going long one currency in London and going short the same currency in New York.

Lack of coordination between a bank's branches is not just limited to trading. After extending a large credit line to a multinational corporation, a bank will divide it up among the branches where the client has subsidiaries.

Without a global risk management system, a bank might allocate too much credit to one branch but not enough to another.

By using a relational database, MTI is able to integrate banking applications and communications into a single real-time, online system, Fludgate says.

ManTec can be used in either a centralized or distributed environment. The centralized approach calls for all branches to share one large mainframe running ManTec.

In a distributed environment, each branch or group of branches has its own ManTec system running on a small- or medium-sized computer. These branch systems are linked to a main system that updates global data.

MTI originally used the ADR Datacom relational database in ManTec, but will convert to IBM DB2 for a system it will deliver to Bank of Montreal. The database management software Stratus and Sybase are jointly developing may find its way into ManTec II.