The situation has changed in this century however, and many firms are looking to establish a new paradigm - one that is based on using executable versus indicative data whenever possible, enhancing and controlling transaction capabilities, and certainly controlling escalating market data costs. Direct to source opportunities provide the ability to meet these objectives, but it requires commitment.

Several interesting observations can be made about current practices:

• Despite notable cost reduction efforts over the past few years, little substantial progress has been made in actually reducing the number of core vendor services at the desktop. Thus, costs have gone down marginally (and in many cases up due to increased user demand) rather substantially.
• Content data from the core vendors continues to become increasingly ubiquitous, thus allowing for displacement opportunities.
• Many IPs for real-time quotes, news and commentary have adopted direct to source strategies - either via feeds or web portals -- which can directly complement existing vendor consolidated platforms, and in some key places replace indicative data provided by these vendors. These opportunities are substantial.
• The availability of off-the-shelf ticker plants from firms such as Wombat and InfoDyne enhance the ability to implement direct to source solutions across many equity sources.
• New fixed income datafeeds from the several IDBs provide high quality content which can readily replace many of the core pages provided by consolidated vendors.
• Transaction systems (both internally developed and vendor provided) increasingly are driving the business. Many firms are looking to upstream internally developed transaction systems.

Conclusion:  Direct to source strategies, which emphasize one consolidated vendor per desktop only and promote the integration of best sources directly from IPs, will enhance end user productivity and decrease operating costs.

A comprehensive strategic sourcing approach is essential to realize these direct to source opportunities. This is equally, if not more important and complex, than the original decision to purchase feeds and a data distribution system in the 1990s. This plan should be comprehensive and global, but also structured to deal with sector (i.e. Fixed Income) issues.

Key issues to consider in developing a plan include:

Real time and supportive content

• What specific data points do your end-users require? Who provides them and where is the quality and price leadership? Do you have the expertise necessary to assess these issues in detail?
• If you were to pick one vendor, which one provides the best of breed content from market makers and IPs, inter-dealer brokers, third party analysis and news services?
• What key contractual and redistribution issues and opportunities will you encounter with direct to source solutions.
• If you implement a comprehensive direct to source solution, do you have the necessary internal market data management staff and processes in place to root out the core redundancy that exists at many desktops?

Online trading systems and execution:

• Which systems will generate liquidity and transparency for your end-users and their clients?
• Which trading system will make your content (sector manifolds, dealer inventory, research and pricing) more available and tradable?
• Can you increase your ability (via either vendor systems or internally developed systems) to attract order flow from a broad distribution of institutional, middle market and retail clients?

Ticker Plants and Distribution Platforms:

• As new technologies evolve, are you prepared to install an internal ticker plant? What is your current posture on your data distribution system? Is it necessary, or are you ready, to upgrade - or are you looking at an end of life?
• Are new vendor application platforms compatible with your MDS and e-commerce strategies?
• Can you redistribute and control access freely to users of choice?
• Are you prepared to re-distribute to other bulge banks and thus by-pass selected vendor solutions?

It is our opinion that the cost savings and enhanced productivity benefits make this approach well worth pursuing.