Two years after State Street acquired Charles River Development (CRD), a provider of services that support front- and middle-office management functions, the custody giant is making enhancements to its State Street Alpha trading platform using Charles River capabilities. The upgrades are driven by interoperability and deeper data integration between the two firms.

The Charles River Investment Management System (IMS) serves as the front-office component of the Alpha platform, while State Street supports the middle- and back-office roles. The two are tied together, forming one front-to-back solution, which is aimed at the buy side, and which provides data for decision-making up to the front office quickly, says Spiros Giannaros, president at CRD and head of platform strategy at State Street.

Charles River’s front-office expertise comes from controlling a large market share of the order and execution management system (OEMS) space. With IMS, users can view their portfolios, run analytics, view products’ risk and investment profiles, and use the information gleaned to make a decision, scan different pools of liquidity in the market, and execute a trade. Middle-office functions center mainly on operations, and validating the quality of the transaction, position, and cash. From there, the back office steps in to communicate with the custodian that holds the securities, maintain a record of the transaction, ensure compliance, and update the accounting books.

“Now we’ve put this together and said if we can control this whole pipeline of investment data and reference data, and own the technology, we can deliver a much more seamless and operationally efficient process for our clients, [and] give them the ability to scale in ways they couldn’t by having fragmented service providers,” Giannaros says.

Lazard Asset Management—a long-time client of both providers, but using separate services—was one of four clients who signed onto the Alpha platform last year, and by the end of 2019, State Street was in talks with more than 100 new and existing clients. A spokesperson for the bank says both those numbers have grown significantly, but was not able to provide updated statistics in time for publication.

If you found the best-in-breed provider in the risk analytics area, or you just have a separate provider in custody, we’re interoperable in that you can take components of this solution without necessarily being bound to all of it.

Spiros Giannaros

Last year, WatersTechnology reported that State Street had completed the base integration of Charles River’s systems. They identified data as the cornerstone—“the lifeblood, if you will”—of the integration, says Giannaros, who re-joined Charles River in December after having also worked at the company from 1999 to 2014.

State Street and CRD started by mapping, across the front, middle and back offices, each instrument traded in the market and their respective data requirements at every stage in the trade lifecycle. Then, they put the findings into a Model Office—a simulated environment to test and validate business and IT processes—in order to better manage the operational challenges that come with managing different parts of the trade lifecycle day-to-day for customers. Third, the team had to find ways of taking the data generated from the process and serving it back to customers who might want to use it in different ways.

In some cases, an analyst might want the data so they can combine it with other datasets or as part of a big data analytics project. In other cases, that data is useful in client or regulatory reporting.

Interop(portunity)

While data might be the cornerstone today, State Street and Charles River have made sure to incorporate system interoperability into Alpha.

“We really want to be open. There’s this theme of choice,” Giannaros says “If you found the best-in-breed provider in the risk analytics area, or you just have a separate provider in custody, we’re interoperable in that you can take components of this solution without necessarily being bound to all of it.”

Much of the interop movement has centered on building tools that allow web-based or browser-based applications to integrate and talk to one another, and conserve precious screen real estate for traders and portfolio managers. Reaching that same level of interoperability between applications written in C++, Java, or .NET—namely, monolithic platforms like OEMSs and terminals—is the next frontier for this movement as trading firms seek out the ability to pluck their preferred software components from cutting-edge fintech vendors and trusted providers, and stitch them together with their preferred trading applications.

State Street and Charles River aren’t the only pair hoping—or bracing—for interop to take hold in the OMS and trading platform spaces. Separately, desktop interop vendor Glue42 is working with Fidessa and its parent Ion Group to extend the life of the trading platform by building new apps and open APIs to allow clients to integrate Fidessa into their fintech ecosystems.

Giannaros says the companies are open to enlisting a partnership with or using technology provided by an interop vendor—Glue42, ChartIQ, and OpenFin are the big three contenders in the space—in their endeavor, but have not elected to do so yet. Currently, Alpha’s interop capabilities are made possible by using existing standards and protocols, and open APIs. In some cases, they’ve opened up their user interface, and made it possible to embed views from clients’ other desired platforms directly in the Charles River container.

“If you think about being a portfolio manager, or trader, or operations person, how do I make it that I don’t have to sign into multiple applications? How do I ensure that I don’t repeat context, meaning I’m looking at a CUSIP here and have to go re-type a CUSIP here,” Giannaros says. ”So how do I pass that context natively in a workflow for a seamless user experience?”