Merrill Lynch Splits Development From Operations; Issues RFP For Equity, Debt; Sorgen Takes TRS Helm

Last week Merrill Lynch & Co. finally issued its request for proposal for a data distribution platform to support its equity and debt traders. In the same week, Merrill revamped its technology division: The firm shifted all new software development projects -- including trading room systems -- away from their associated business units and consolidated them under senior vice president Howard Sorgen.

According to sources at the firm, some senior Merrill officials were dismayed that the firm had spent so much and gotten so little in terms of deliverable systems. The reorganization is intended to yield more systems at less cost, the sources say.

It's unclear what impact the reorganization will have on the disposition of the RFP, if any. The document seeks bids for a digital data distribution system to support Merrill's equity and debt traders in New York, representing as many as 1,200 positions. Only three vendors were asked to reply: Market Vision Corp., Reuters and Teknekron Software Systems Inc.

The reshuffle does, however, settle the tug of war that had lately been going on between senior vice president Art Thomas and Sorgen; until this reorg, each executive's staff had been taking a different approach to selecting a digital data distribution system. Sorgen's global information systems group had been preparing the current request for proposal (TST, Oct. 18), even as members of Thomas' group had two independent projects of their own under way (TST, Sept. 20). It could not be determined at press time under whose umbrella the RFP now resides.

The reorganization relieves Thomas of his responsibility for trading room systems development, handing it to Sorgen. Vice president John Galante and first vice president Steve Joachim -- who head fixed-income and equity development, respectively -- no longer report to Thomas, but answer instead to Sorgen. Thus, their respective efforts to shop for trading room platforms will now likely wait on input the firm will glean from Sorgen's larger RFP.

Galante has been eyeing Teknekron Software Systems Inc., along with Market Vision Corp. and an internal development group (TST, Sept. 20). Galante's fixed-income group (known at Merrill as the capital markets group) has installed two roughly 50-position pilots of Teknekron's TIB, in New York and London. Joachim's group, meanwhile, has purchased Reuters' Triarch 2000 for use on the firm's equity derivatives desk. There, some two dozen traders access Reuters' and other data via Sun workstations running Reuters' Advanced Trader Workstation display software. Elsewhere on Merrill's equity floor, Triarch 2000 supports program trading and equity analytics, sources say.

By centralizing software development and leaving operations divided along business lines, Merrill has pushed its organization in an opposite direction from the one in which many firms have shifted. However, a Merrill spokesperson says that Galante and Joachim will continue to communicate closely with Thomas.

Previously, Thomas was charged with operations and systems development for Merrill's capital markets group. For the retail brokerage group -- called the private client group -- operations and development had also previously been joined, under senior vice president Harry Allex. Sorgen's former turf was global information systems -- including the firm's so-called core operations and systems, as well as telecommunications. All three had reported to executive vice president Ed Goldberg.

Now Thomas is left overseeing day-to-day operations for capital markets, while Allex retains operations for the retail brokerage and for Merrill's printing and mail operations. All of Thomas' and Allex' direct reports who had been involved in development -- including Galante, Joachim, first vice president Joe Freitas and first vice president Ritch Gaiti for retail brokerage -- now answer to Sorgen. Allex, Sorgen and Thomas continue to report directly to Goldberg.

Sorgen cedes his former responsibilities as head of global information systems to Howard Shalcross. As head of global I.S., Shalcross will oversee Merrill's domestic wide area network, its data center and core systems. Shalcross, a long-time Merrill Lyncher, was most recently head of the firm's Professional Securities Services Group. That group oversees operations at such Merrill affiliates as its correspondent group Broadcort Capital Corp., soft-dollar broker Citation Financial Group L.P. and Wagner Stott Clearing Corp.

Also moving to Shalcross' domain is vice president Robert "Skip" Hansen. Hansen's group, reporting to Sorgen, had engineered the RFP that was issued last week. The RFP was formally disseminated by Merrill Lynch under the aegis of the firm's so-called technology acquisitions group, which handles purchasing for Merrill, sources say.

The reorg is Merrill's most drastic in years. Goldberg, who oversees all of Merrill's operations, systems and technology, "just took the job in 1990," a spokesperson says. He took time to get to know his staff and the organization, she says. This is the first major change Goldberg has made since joining, she adds.

The RFP was designed, in part, to bring the disparate Joachim-led equity and Galante-led debt bidding processes under a common rubric. It could not be determined to what extent the common RFP takes as its goal putting in place a common platform for both desks -- or whether it includes Merrill trading rooms outside New York.

Both groups currently rely primarily on a Reuters/Rich Inc. video switch that's been in place for years. Both are now exploring digital data distribution to UNIX-based workstations from Sun Microsystems Inc. The groups have also received a mandate to seek economies of scale and to standardize where appropriate and possible (TST, Oct. 55, 1992).

It remains to be seen to what degree, or whether, Sorgen will seek to impose closer collaboration on Galante and Joachim. However, also reporting to Sorgen is George Lieberman, a vice president lately hired from Citicorp to plan Merrill's infrastructure architectures. Should Lieberman be asked to turn his attention to trading room systems, the firm may find itself forced to pick a standard platform.