London: Dresdner Kleinwort Benson (DrKB) has renewed and expanded its use of London software house Xenomorph, which integrates several historical data sources and analytics for its equities derivatives desk. The Xenomorph system provides DrKB traders and risk managers with integrated data from Bloomberg, Reuters and Fame Information Services.

Xenomorph, which was formed over four years ago by a group formerly from Bankers Trust and JP Morgan, offers a data management and analysis system for trading, risk management and software application development. Users can store, integrate, distribute and analyze market data, whether it’s external or internal.

"The main functionality that we use Xenomorph for," says a source at DrKB, "is to analyze market data." He cites examples such as using historical market data to calculate correlations, moving averages and baskets. The system has been in use at DrKB for the past year and the agreement has just been extended for an additional year.

According to the source, ten users out of 90 on the equities derivatives desk are utilizing the Xenomorph system, primarily to calculate structured products in the equities derivatives market. The investment bank plans to expand the use of Xenomorph as the number of exotic products increases.

Initial plans may include replacing its internal database of historical convertible bonds with data sourced from Xenomorph and expanding its use to traders, risk managers and finance controllers in two other global centres.

Data that is accessed via Xenomorph includes Bloomberg’s Open Bloomberg as well as its Data License product and Reuters for its equities and index information. Xenomorph has also recently added a driver to access a selection of Fame databases. While Reuters only offers two years of history, both Bloomberg and Fame offer 10 years of historical data. There is no immediate need to look at incorporating Bridge data, says the source.

None of the data is updated in real-time, although the source says that the risk managers have recently begun taking five-minute snapshots of the market from Reuters.

CROSS REFERENCING

As Xenomorph offers the functionality to cross-reference various instrument codes, users can work with such codes as Reuters Instrument Codes (RICs) or Cusips interchangeably.

Before choosing Xenomorph for the equity derivatives desk, DrKB evaluated its competitor Massachusetts-based Leading Market Technologies (LMT), which is in use in other departments at DrKB. Xenomorph also operates in the space of Inventure’s Ranger.

The decision to go with Xenomorph was due to the systems flexibility, says the source. He says that LMT focuses largely on the front-end and has very good analytics—in some cases better than Xenomorph’s—but the API is not as flexible. "Traders are looking to use Excel on the front-end and support people and programmers want [Microsoft’s] Visual Basic or C, which LMT did not offer at the time."

Jay Smith, chairman and chief executive officer of LMT, however, says that LMT has for several years offered C and VB programming capabilities, alongside its own proprietary programming language, XTL, which was built specifically to manipulate time-series data. Smith also says that users can monitor Excel cells from the LMT Expo front-end or can separately use dynamically updating Excel spreadsheets.

On the front-end, users access data via Excel spreadsheets, but they also utilize Xenomorph’s Data Explorer, which is a Windows Explorer-like application that allows users to browse their various content sets.

The Xenomorph server, which is hosted on the client site, is based on dual 400 Compaq Workstations with half a gigabyte of a RAM and a 8.47 gigabyte hard drive. The operating system on both the front- and back-end is Microsoft NT 4.0. The front-end accesses the Xenomorph server via DrKB’s Local Area Network (LAN).

Xenomorph was initially built to handle Primark’s Datastream price histories in the equity and bond markets. It now also integrates data from Bridge, Factset Research Systems, London International Financial Futures and Options Exchange (Liffe) data and Telekurs Financial.

The company’s founders include Brian Sentence, who joined from JP Morgan’s equity derivatives pricing models group, Chris Budgen, who worked for both Daiwa Europe and then Bankers Trust, Mark Woodgate, who worked at Logica, and Matthew Skinner, who joined from ING Barings, where he was an equity derivatives trader.