Morgan Stanley Buys Suns For Fixed Income As Internal Debate Rages: TSS Or Not TSS?

Morgan Stanley & Co. has purchased a large number of Sun Microsystems Inc. SPARCstation workstations and servers, setting them aside for installation at its fixed-income trading desk.

The acquisition of the Sun workstations may mark the beginning of Morgan's long-delayed arrival among Wall Street's most technologically advanced firms. Though Morgan has used Suns in the past -- particularly in its much- vaunted, but relatively small Advanced Proprietary Trading (APT) risk management and analytics development group -- it has not to date rolled out the UNIX processors on a large scale. Sources close to the firm put its fixed-income trader count at about 60.

But the presence of these Suns doesn't mean Morgan's long night's journey into technological day has ended. Indeed, sources say that its past involvement with Sun may complicate the process of selecting local data distribution and workstation software for its fixed-income traders.

These sources say Morgan Stanley is now undergoing internal conflict over whether it should, as a member of EJV Partners L.P., go with the EJV's trading platform for its UniVu fixed- income data and analytics package. Last summer, EJV chose Quotron Systems Inc.'s Trading Support System (TSS) to provide real-time data delivery to UniVu applications (TST, July 1, 1991).

Managing director Benjamin Wolkowitz, who recently assumed Morgan Stanley's seat on the board of EJV, referred calls to newly elevated managing director Joel Kaplan, who oversees fixed-income research, including general and EJV-related technology issues. Kaplan referred requests for comment to Morgan's public relations department. John Mack, managing director and overall head of fixed-income, and Gary Goehrke, managing director and head of information systems worldwide, were traveling and unavailable for comment at press time. Other Morgan executives, including Keith Iverson, David Weiss and Joseph Sachs, all formerly of the APT group, didn't return calls.

But sources familiar with the firm's facilities say Morgan's fixed-income traders, like most others at the firm, continue to conduct business using outdated technology. They access proprietary information and some analytics via dumb terminals linked to an IBM 3090 mainframe, and receive market data via a proprietary video-switch. Additional analytics are run on Suns at some trader positions.

These sources say the firm is now close to selecting TSS for much of its fixed-income desk -- including corporates and governments, but not mortgage-backeds. However, before it can pull the trigger, it must decide what to do with the fixed- income analytics it has already built in-house. The chief developers of these analytics are those who have been the firm's longest users of Sun workstations -- the heirs of the now-defunct APT group. APT used Sun-3 and Sun-4 workstations and servers to run analytical applications supporting its proprietary trading operation (TST, March 14, 1988).

Cloistered and aloof, APT was once home to Morgan's famous -- or infamous -- index arbitrageurs, among them Nunzio Tartaglia and Greg Kipnis. When APT ceased trading about two years ago, its staff of quants either left Morgan or were welcomed into its main trading operations. A number of them remained, however, to form what is now known as the APL group.

Named for the programming language it uses to write applications, the APL group continues to develop analytics to run on what used to be the APT's Suns. APL developers ported code written on an IBM mainframe to UNIX using a compiler provided by STSC Inc.

Going with TSS would go against certain long-held -- if not necessarily strongly held -- expectations at Morgan Stanley that APT, and subsequently APL, would take the lead when the firm finally got around to installing a UNIX platform. Sources say that when APT began operating in the mid-1980s, the work it did using the Sun platform -- including the interfaces APT built to Morgan's proprietary back-office system, TAPS -- was viewed as a prototype for eventual use firmwide.

Other EJV members have found themselves on the horns of similar dilemmas. Sources say that Salomon Brothers Inc. and Goldman Sachs & Co. have balked at using TSS, preferring to stick with the analytics and systems they've already developed in-house rather than shift to a new platform and a new API.

To date, only First Boston Corp. (TST, Dec. 16, 1991) and Shearson Lehman Brothers Inc. (TST, Oct. 21, 1991) have opted to go with TSS -- and now top technology sources at Lehman are saying that the firm has placed on hold a rollout of the TSS platform while it further evaluates the costs and benefits of porting its Impact suite of proprietary analytics to TSS.

At the same time, questions have arisen as to whether TSS is really ready for prime time. A Quotron spokeswoman confirms that the system has not been certified to deliver Telerate Systems Inc.'s TDPF, the sole digitally delivered source of Cantor Fitzgerald Securities Inc.'s long-bond prices, a sine qua non for many fixed-income traders.

Meanwhile, though EJV said UniVu would be set for shipping more than a month ago, users who expected to receive it, have not.

The main incentive to using TSS remains the blessing bestowed on it by EJV. Not only will EJV run UniVu on TSS, but it also has an agreement with Quotron whereby EJV will pay UniVu/TSS users' software licensing fees to Quotron, according to sources close to EJV. These sources say that the agreement provides for a minimum number of users, as well. EJV and Quotron officials couldn't be reached for comment at press time.

The bulk of decision-making power over what data distribution system will eventually be installed at Morgan's fixed-income desk resides with Kaplan.

A variety of sources indicate that Kaplan has mixed feelings about whether to go with TSS. As a graduate of APT, he has a certain amount of allegiance to the APL group and its software developments, sources say. Indeed, one source familiar with Morgan's inner workings says Morgan Stanley as a whole maintains "a huge commitment to APL" as a tool for building analytics.

At the same time, Kaplan is pulled by the firm's business- side interests. Veteran managing director Mack -- who heads the fixed-income department overall and who is said to have been the driving force behind Kaplan's promotion at the end of last year -- leans toward trader-driven development of applications.

Sources say Mack was very pleased to "capture"Ñas one puts it -- the APT traders back when that group was disbanded. He felt he could take these technologically adept traders out of the APT monastery and put them in a position where they could apply their know-how to Morgan's mainline businesses.

One source notes that as long as a year ago, it was clear that the APL group had fallen out of favor with principals and managing directors involved in fixed-income trading.