Reuters Upstages Telerate With Reuter Bond Equation, Analysis Package For Japanese Yen Bond Traders

Reuters Japan Ltd. has beaten Telerate Systems, Inc. to the punch in releasing a PC-based analytical service for the Japanese Government Bond market. While the yen bond version of Telerate's Tactician is almost a year late, Reuters has stepped in and launched the Reuter Bond Equation, which provides a range of fundamental and technical analysis capabilities.

Interestingly, Reuters doesn't provide the market data to support the Reuter Bond Equation. Customers receive cash prices directly from Nihon Sogo Shoken (Japan Bond Trading Co., Ltd.), a broker's broker similar to the interdealer brokers in the U.S. government securities market, and futures prices directly from the Tokyo Stock Exchange. Reuters expects the Bond Equation eventually to be adapted to other financial markets and to connect to the Reuter Integrated Data Network.

In contrast to Telerate, which has separated its PC-based analytic services into fundamental (Tactician) and technical (Teletrac) product lines, the Reuter Bond Equation provides a broad range of capabilities on a single terminal. These include a full-function bond calculator, all standard technical studies, over-the-counter options pricing, arbitrage/hedging models and conventional quote terminal features like monitor lists and limit alerts.

The Bond Equation runs on IBM 80386 and compatible machines equipped with expanded memory, math coprocessor and EGA video. It combines real-time with locally-stored historical information to generate analyses on tick, five-minute, hourly, daily or monthly data. Under a user-selectable windowing scheme, up to 12 charts can be displayed on a page at any time.

In the strange bedfellows world of analytic trading software, it should come as no surprise that the Reuter Bond Equation and Telerate's Tactician share some common ancestry. Both were created by Sydney-based firms with roots in Australian Gilt Securities Ltd., a reporting dealer to the Reserve Bank of Australia.

Equity Systems, Ltd. of 24 Ash St. developed the Reuter Bond Equation. Giltnet, Ltd., also of 24 Ash St., developed Tactician. Giltnet emerged from AGS's trading operations in 1984 while ESL was formed within AGS subsidiary Australian Gilt Options in August 1987.

Shortly after the October 1987 market crash, ESL broke away from Australian Gilt Options, whose operations were acquired by Kleinwort Benson, says ESL managing director Andrew Wilshire. As its name implies, ESL originally planned to serve the equities markets. But since the crash it has shifted its attention to the fixed-income and currency markets.

While both grew out of AGS, there is no connection between ESL and Giltnet, Wilshire says, though until recently they shared managerial talent as well as the same building. David J.D. Vanrenen, managing director of Giltnet, also served as chairman of ESL until "earlier this year," says Wilshire, who insists Vanrenen's involvement was "paternal" and the result of ESL and Giltnet's common heritage. Giltnet is publicly traded in Australia while ESL is privately held.

For its part, the Telerate/Giltnet Tactician product seems to be struggling. Giltnet's fiscal 1988 annual report shows an operating loss of A$1.13 million on revenue of A$1.79 million. As of last September, 154 Tacticians had been sold worldwide, with virtually all of the growth in calendar 1988 coming from outside the U.S., the report says.

Tactician's sales have been "somewhat disappointing," admits John Jessop, Telerate executive vice president, although they seem to be picking up. Officials of Telerate and Giltnet met last month to re- evaluate the way Tactician products are developed and marketed, he says.

Telerate recently introduced an enhanced version that adds analysis of money market instruments to Tactician's existing government securities coverage. In addition, the first installation of Tactician on a video switch took place in September and a DOS-based LAN version is promised for the first quarter.

Giltnet's five-year agreement with Telerate calls for it to develop Tactician for several fixed-income markets, including U.S. mortgage- backed securities and Japanese yen bonds. To date, Giltnet has delivered versions of Tactician for U.S. Treasuries, U.K. gilts and Australian gilts but the yen bond package it originally promised to release in January 1988 remains vaporware a year later. Its latest annual report makes no mention of the yen bond product.