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Marketcetera's lifeline to the hedge fund industry

Marketcetera's platform is drawing increased attention from money managers by promising to boost productivity and lower costs.

This week Marketcetera announced general availability of its Marketcetera Automated Trading Platform, an open-source platform for hedge fund traders. I wrote last week about Marketcetera's seemingly odd timing, creating a trading platform for hedge funds just as they've fallen off a financial cliff.

But in talking further with Marketcetera's Roy Agostino, chief marketing officer, and Graham Miller, chief executive officer, I'm increasingly inclined to believe that the company couldn't have timed its market entry more perfectly.

Consider that the company's Web traffic is up over 300 percent since January 2008, suggesting growing interest in the company's products. More important to revenue, however, is the statistic that registrations (for white papers, etc.) are up over 400 percent year over year. These are people that have more than a passing interest in Marketcetera. They're potential buyers.

I asked the Marketcetera executive team what is driving the interest in its open-source trading platform, and heard three themes that resonate across the open-source spectrum:

  1. Total cost of ownership. Hedge funds and the other large financial institutions are trying to drive down their costs, especially in the wake of the biggest financial meltdown since the Great Depression;
  2. Vendor lock-in. Agostino suggested that money managers are increasingly frustrated with being locked-in long-term to their Order Management System (OMS) vendors, especially when it's become common practice to demand hefty professional services fees just to make the proprietary OMS suitable to a hedge funds day-to-day requirements;
  3. Control and flexibility. Hedge funds view technology as a competitive differentiator, and many have discovered that proprietary OMS offerings simply don't give the flexibility to tweak the OMS to fit their requirements. Hence, they have developed their own OMS in order to get the flexibility they want, but open source gives them the ability to start with a robust platform and fine-tune the last 10 percent or so of their requirements.

With this 1.0 release of Marketcetera's trading platform, the company can now get money managers up and running with automated trading strategies very quickly. Or, as recently happened with one large financial institution, the company built out a trading platform based on Marketcetera without paying a dime, and then approached Marketcetera for a support contract just before its go-live date.

Minimal sales and marketing investment by Marketcetera with minimal hassle and zero licensing cost upfront from the eventual customer. That's the way it's supposed to work, and that's what is driving so much interest in the Marketcetera platform.

There are other things that Marketcetera is working on, including fostering collaboration between its customers to find areas of overlap (e.g., Advanced Message Queuing Protocol) where money managers can save money and boost productivity by pooling resources to build an even better general-purpose Marketcetera platform, while simultaneously tweaking it to fit individual needs.

But for me, it's just impressive to see how explosive the interest in Marketcetera has become, even as the industry implodes. Marketcetera is throwing a lifeline to the hedge fund industry and, according to the company, the industry is enthusiastically responding.