Ex-SPMI Execs Form Mentor Associates, Plan To Package Mortgage-Backed Information

A new niche in the real-time financial information business has been discovered by a group of former executives from the now-defunct Security Pacific Market Information (MTR, July 1986). The group has formed a new company -- Mentor Associates -- to gather and package specialized information contributors for resale through other quote vendors.

"We want to be a wholesale vendor rather than particularly tied to one delivery vehicle," says Mentor principal Peter Kower, who says it's too early to elaborate further. Mentor's first niche, however, is thought to be mortgage-backed securities, an area in which SPMI was beginning to develop a reputation before it folded.

The Mentor concept, sources say, is to do all of the legwork needed to round up contributors, and then to sell them as a package to third-party quote vendors -- vendors who might like to offer the data but lack the skills or time to acquire contributors. Mentor apparently thinks that opportunities for this approach will abound in some of the emerging boutique areas of the fixed-income market. "There are some interesting niches that are going to develop," says Kower.

Mentor, in other words, would provide some sort of consolidated feed of market data, serving the same wholesaler role in the over-the-counter fixed-income markets that the exchanges play in the equities, futures, and options markets.

Three questions emerge as crucial to the success of this approach. First is whether Mentor can get prospective contributors to take an interest without an established base of subscribers. "I'd say they have a tough job ahead of them," says Telerate president Neil Hirsch. "Contributors are only going to spend the time if there are recipients out there."

The second issue is "whether they can in fact pull together a package that's cheaper and more efficient than people can [do] themselves," says Tom Jordan, chairman of Knight-Ridder Financial Information. "We've decided ourselves right now that we just want to get the information directly from the dealers and brokers rather than go through intermediaries."

The final question is how many third-party quote vendors -- and how many of their customers -- really want the kind of information Mentor might package. Telerate, Reuters, and KRFIS certainly have the need, but also have the resources to do it themselves. Vendors in equities or futures certainly don't have the resources, but may also have no need.

Telerate's Hirsch is particularly skeptical about the need of equity traders for money market data. "We provide a small package to Quotron called the Telerate Cash Market Profile, which is geared towards the equity people to give them a general idea of what interest rates and foreign exchange are doing," he says. "It's a very low-cost add-on and hasn't been anything to speak of."

Despite these obstacles, the significance of Mentor's approach shouldn't be overlooked. It's another step in the direction of differentiation, a new link in the chain connecting the data source with the data user. How far this differentiation will go -- i.e., how much of an argument can be made against vertical integration in the quote business -- remains to be seen. 128 Mbytes RAM in IDN Server