Telerate, Intex Team Up To Answer London FOX RFP

Telerate Inc. and INTEX, the Bermuda-based automated futures exchange, have joined together to answer the London FOX's RFP to upgrade its automated trading and price reporting systems.

There is currently no formal agreement between Telerate and INTEX, says INTEX President Tom McKiernan, but there is an understanding that "we'd like to work together."

Since joining INTEX late last year, McKiernan has made no secret of his desire for other exchanges to use INTEX's network for executing and routing orders.

Although INTEX can offer potential partners the software and processing capability for worldwide electronic trading, it does not have a lot of real estate. Less than 50 personal computers are wired into the INTEX network.

A relationship with INTEX might be Telerate's answer to the Post (Pre) Market Trading system Reuters Holdings PLC is developing with the Chicago Mercantile Exchange. The CME plans to let its members trade futures on using the Reuter Dealer Trading System during the 16 hours a day when the exchange floor is closed.

London FOX isn't asking anyone to provide it with a British version of PMT, but jointly submitting the proposal could be a dress rehearsal for Telerate and INTEX.

A joint venture with INTEX would not be the first time Telerate has sought a partner to provide it with the technology necessary to compete in the financial information market.

Telerate is already working with AT&T to develop a foreign exchange transactional product to compete with the Reuter Monitor Dealing Service. Essentially a high-speed telex, Monitor is well-suited for negotiated transactions in over-the-counter markets, but does not lend itself to auction-style trading found on exchanges.

It is not clear what role Telerate's worldwide network of 60,000 terminals would play in London FOX's plan to upgrade its automated trading system and its Manifest price reporting system, which consists of about 2,000 terminals in the United Kingdom.

Perhaps Telerate and INTEX are hoping their proposal will cause London FOX to broaden its horizons and consider an after-hours trading system. They may find a sympathetic ear in London at the neighboring International Petroleum Exchange, whose hopes for international expansion were dashed Jan. 20 when the New York Mercantile Exchange rejected a link with the IPE.

INTEX already tried to interest IPE chief executive officer Peter Wildblood in automating the exchange's gas oil contract, but Wildblood was holding out for a link with NYMEX.

London FOX introduced the Automated Trading System, built by the International Commodities Clearing House, in July 1987 when it listed a white sugar contract. Average daily volume has been running about 1,700 contracts, although white sugar recently traded a record 5,300 contracts.

During testing, ATS handled peak volumes of 990,000 contracts, so there is little chance trading in white sugar will exceed the system's capacity. However, London FOX has "some fairly ambitious plans," says Chris Kennedy, business development manager.

London FOX plans to launch new contracts that will be electronically traded and intends to transfer its options contracts from open outcry to ATS. Existing futures contracts also may be moved onto the system, but Kennedy stresses this decision is in the hands of members committees, not the exchange.

When London FOX learned that ICCH was building a new version of ATS, it decided to issue an RFP to see what else was available. "When we took the current system onboard, there weren't many alternative suppliers in the market," says Kennedy. "Now there seem to be quite a few. It seemed to be a sensible time to make sure there wasn't something superior elsewhere."

Kennedy declined to disclose who responded to the RFP for the new system, which will combine automated trading and price reporting. The deadline for submitting bids was Jan. 22.

Sources say the short list for the system includes Telerate/INTEX, International Commodities Clearing House and Telefax Data Systems Ltd., which helped develop Manifest, along with London FOX's wholly- owned subsidiary, Commodity Market Services Ltd.

With the introduction of a new ATS, ICCH is preparing to join the ranks of vendors offering turnkey automated exchanges based on DEC hardware.

The list already includes INTEX, the computerized futures exchange based in Bermuda; the Swiss Options and Futures Exchange, the electronic market that is scheduled to begin operating March 1; and Transvik, an automated system developed by Invik & Co. AB, a Swedish merchant bank.

In the third quarter of 1988, ICCH will introduce the new ATS using DEC VAXs. The existing ATS, which has been installed at London FOX and the New Zealand Futures Exchange, is a Datapoint system.

ATS 2 will use a VAX host and 80386-based personal computer as a trader workstation, says Wal Reisch of ICCH. Reisch says the new ATS release will provide users of the existing system "with a migration path when it becomes commercially viable."

In conjunction with the launch of ATS 2, ICCH plans to introduce a real-time clearing system also based on DEC VAXs. By using a database management system and a direct feed from ATS, the automated clearing system will allow up-to-the-minute position monitoring and risk management.

Although the real-time clearing system is designed to complement ATS, it will accommodate contracts that are traded by open outcry as well as those executed electronically.

In offering the system to different markets, Reisch says ICCH expects to encounter situations similar to London FOX, where white sugar is traded electronically and other contracts are traded in the pit.