What's In A Toolkit? Depends Who You Ask!

The world doesn't work like a PERT chart. If it did, the emergence of digital data feeds would have coincided with a global upgrade to digital trading systems. In the real world, elementized market data is arriving in dribs and drabs and neither page-based information nor the video switch-based systems that distribute it are going away.

In the meantime, users are demanding tools to access, exploit, and distribute digital market data through their existing systems. For many, this means working with switch vendors like Micrognosis and Data Logic.

But Data Logic and Micrognosis are taking markedly different approaches to satisfying their clients' need for tools. While Micrognosis aims to equip clients with the most basic layer of application development tools, Data Logic is providing clients with a set of high-level analytic applications and retaining the lower level tools for its own development staff.

The new applications created under Data Logic's development environment are now being installed for the first time in the foreign exchange dealing area of a major international bank. They include a range of decision support applications and utilities known as the value-added package.

The short-term arbitrage module identifies arbitrage opportunities for spot FX, deposits, swaps and outright forward exchange rates from overnight to one year on any two currencies.

The cross-currency forwards module calculates spot and outright forward exchange prices with relevant swap rates for up to one year across any two currencies whose spot and swap prices are quoted against the dollar. The forward European Currency Unit calculator projects theoretical ECU prices from a basket of currency weightings using relevant internal rates and provides valuation in any of the component currencies.

Forward rate agreement trading is supported by an FRA against futures and forward deposits arbitrage module which compares FRA prices against calculated implied futures yields and bid and offer forwards up to three years.

Other features include forward/forward arbitrage against futures, forward exchange rate calculation, swap rate calculations for short- and medium-term interest rate swaps using prices from Reuters and Telerate pages.

Data Logic's page distribution and internal rates page management facility lets dealers maintain internal pages for spot, forward, futures prices and cash curves. Rates can be updated manually or automatically via reprocessed external data sources.

Data Logic also is providing a calendar function that identifies valid working days and calculates the number of days both in standard periods and broken dates. The calendar will be used by all application functions involving maturity dates and covers weekends, holidays and non-work days for the following currencies: sterling, U.S. dollar, Swiss franc, French franc, Deutsch mark, lira, Dutch guilder, ECU, and Japanese yen.

Not every international bank would be willing to accept the high- level applications offered by Data Logic as a decision support package for foreign exchange dealers. The "Not Invented Here" syndrome prevents some organizations from accepting software solutions that aren't baked from scratch on premises.

The Micrognosis applications development toolkit is "a general term for a number of products that are designed to allow users to build applications that access data from and contribute data to our system," says Stefan Choppin, head of strategic development at Micrognosis International.

The Micrognosis tooklit includes at least six modules.

The page access module, intended for use with page-based digital feeds, allows users to access pages of information through an application running on a workstation connected to the network.

The page contribution module lets users develop their own service access unit to contribute paged information to the network for display at workstations.

The data extraction unit converts page-based data into elementized (record-based) data for access through the digital sub- system.

The SQL programming interface will allow applications to access elementized data from a data dictionary connected to the network.

The data injection unit will allow applications to input elementized data onto the Micrognosis network.

The intelligent workstation system is a display management tool for applications intended to run on workstations.

At present, only the display management system and the page-based portions of the library are commercially available, according to Choppin. The programming library is currently compatible only with Sun or DEC VAX hardware.

Much of Micrognosis' application development toolkit "was developed with Morgan Guaranty as the driving force," says Choppin. Both Micrognosis' and Data Logic's approach to toolkit development were clearly shaped by their clientele.

Micrognosis customers such as Morgan Guaranty Trust Co. and Shearson Lehman Hutton Inc. have had application development efforts underway for some time. The analytics, in some cases, are already there. All that's needed is a set of appropriate interfaces to the Micrognosis network.

For banks without the wherewithal or the ambition to support full- scale internal analytic development groups, Data Logic's tools may be the more attractive package.

But each approach has its drawbacks. Data Logic's application package is highly tailored and wouldn't be appropriate beyond a select subset of FX dealing units. Micrognosis won't even be ready to address higher level analytic needs until the spadework on its toolkit is complete.