First Boston Corp. Reconsiders Fixed-Income Group's Platform

First Boston Corp. is considering a major reevaluation of the technology that supports its 260-position fixed-income securities trading group in New York.

The move to reexamine the bond traders' data distribution platform comes scarcely a year after First Boston set down what then appeared to be long-term technology plans: Quotron's Trading Support System (TSS) was signed up to support the fixed-income traders while ADP's FS Partner was tapped to do the same for the equity and investment banking traders (TST, Dec. 11, 1991).

Now, however -- in the fixed-income department at least -- all bets are off. First Boston insiders say that the firm's technology executives consider TSS's future to be extremely conditional. Meanwhile, sources close to the firm say that it has been looking for new key technology staff with an emphasis on candidates' experience in providing data and services to fixed-income traders.

And it's still not clear what First Boston expects to get from Kevin Scully, the new director of fixed-income technology it appointed in September. Formerly of Sumitomo Bank Capital Markets, Scully reports to Craig Lipka, the firm's managing director in charge of mortgage-backed securities trading and fixed-income analytics and technology.

Lipka and Scully didn't return calls seeking comment. First Boston information technology chief Charles Mayer was traveling last week and couldn't be reached.

The immediate chain of events leading up to FBC's fixed- income technology rethink most likely began with the reversal of fortune TSS underwent late last summer. At that time, the system was rejected in request-for-proposal contests at two major firms -- Citicorp and Goldman Sachs & Co. (TST, Sept. 8).

Soon thereafter, Quotron brought its already widely swinging layoff ax down onto the heads of marketing and support staff responsible for TSS. The vendor then embarked on a new marketing strategy for its data distribution platform: it would sell the TSS source code outright, offering customers no support or service once the system was installed (TST, Sept. 21). Meanwhile, sources close to Quotron say that TSS product-support staff continue to be cut.

A Quotron spokesperson denies that the vendor has diminished its expectations with regard to TSS. She declines to comment on specific staff assignments.

However, sources at First Boston say that the firm is as concerned with Quotron's commitment to continue enhancing TSS as it is with support. Sources say that if Quotron decides not to move forward with development and enhancement of the product, then the likelihood of First Boston's remaining with it would be slim.

Still, despite its desire for upgrades and enhancements, First Boston has greeted TSS's latest release, version 3.0, with mixed emotions. The release includes the new MarketColor workstation software as well as other new functionality.

Sources say that the firm has yet to evaluate the new release fully, but already has one immediate concern. Because First Boston's existing TSS infrastructure is of a considerably older generation than the current version of TSS, the firm must rewrite proprietary applications to make them interoperable with any new releases. This has caused some at FBC to favor replacing the system and starting from scratch.

Meanwhile, sources say the firm would like some assurances that further releases will emerge. According to one top technology source at FBC, the firm is paying close attention to who might undertake the task of supporting and developing the system should Quotron finally decide to shed it altogether (see sidebar, this issue). The source also says that First Boston itself might buy the source code -- a maneuver that would of course increase the system's longevity at the firm.

Not surprisingly, as these clouds of doubt gather, competing data distribution system vendors have recommenced angling for the firm's fixed-income business. Sources say First Boston has already begun to entertain sales pitches from some of the usual data distribution system suspects.

That TSS was able to establish a foothold at First Boston in the first place -- let alone to dominate an entire trading desk -- is testimony to the shifting power of the firm's information technology department. Over the past couple of years, technology decision-making power has moved from the I.T. department to the business entities themselves.

Though CIO Mayer had given a handful of I.T. execs oversight of the systems employed by each of the firm's business groups, by the end of last year many of them had fallen out of power.

For example, since quantitative trader William Cook's relationship with First Boston first began in 1990, he has gradually assumed general oversight of the firm's equity traders' systems -- hiring some of his own technology staff to manage the job (TST, Feb. 10). Meanwhile, the I.T. exec charged with overseeing equities, Roml Lefkowitz, was reassigned within the firm and not replaced.

Something similar took place in the fixed-income trading area. Sources say that the I.T. exec once responsible for fixed-income trading systems -- Ike Putterman -- was forced out at the end of 1991. At the time, CIO Mayer said that the firm would undertake a search to replace Putterman. Sources say that Mayer had hoped that the I.T. group would be able to retain control of fixed-income trading technology -- even if it had already lost equities.

But Putterman was never replaced. Instead, sources say, technology decision-making power was consolidated with the person who was then head of fixed-income analytic systems, Jeff Borror -- who worked for the business unit, and not the I.T. group. Later, Borror left to join Shearson Lehman Brothers Inc. and was replaced by Kevin Scully.

Sources say that a key motive behind First Boston's ultimate embrace and full-scale rollout of TSS was the fixed-income business unit's desire to hew to the pro-TSS line established by EJV Partners L.P., of which First Boston is a partner. Recently, however, the EJV has backpedaled on its endorsement of TSS. The question is, to what degree will First Boston -- the largest known user of the system -- do likewise.