Fears on FT's ODIN software trigger fresh concern

FTIL says is committed to support the software, but brokers want it to be ring-fenced to protect users in future to avoid systemic risk

The controversy related to ODIN software, through which thousands of brokers trade on various exchanges, has created ripples in the market. Financial Technologies (FT), owner of the software, has said this was a concern, adding it was committed to supporting the software.

The brokers’ body, while admitting the software was useful, said due to the wide-scale investigation and court cases following the crisis at FT’s subsidiary National Spot Exchange Ltd (NSEL), ODIN’s source code should be ring-fenced to safeguard against systemic risks.

Experts, however, say global precedence with regard to government intervention in a source code owned by the developer. They add even if FT has to shut operations, it won’t mean the software stops running; this will happen only when BSE and the National Stock Exchange (NSE) stop sharing live data. “It is a bit far-fetched for the government to step in and say it will take the source code (a language to write software). There is no legal precedence of this globally,” said Vijay Mukhi, cyber-crime and technology specialist.

ODIN is a multi-exchange, multi-currency front office trading and risk management system. It allows access to all major exchanges, across products. ODIN is installed at brokers’ terminals, while most other similar exchange-sponsored software is installed at the exchange end, and brokers offer to participate. This is why brokerages prefer to use ODIN. “Ideally, when a financial institute has a tie-up with an IT vendor for sharing data, globally it’s a practice that the institute will have some control on the source code. Ideally, here too, NSE and BSE should have such an agreement with FT. If it’s not there, NSE should be answerable,” said Deepak Mohoni, technical analyst and founder of Trendwatch.

FT to continue support
Rubbishing the fears of brokers, an FT spokesperson said, “FT, as an organisation, is a going concern. This is our main business and events related to other entities in the group do not and will not affect the business continuity of FT… a group of vested interest with a mix of competitive and self-centred agenda is trying to disrupt the sentiment among the larger section of market intermediaries and the broking fraternity by spreading unsubstantiated concerns. We would like to assure all concerned that FT is committed and will remain committed to its customers and continue to support their business.”

Old controversy
In the past, too, this issue had led to controversy. FT had to drag NSE to court regarding the issue of brokers being barred from using ODIN. At that time, the court had ruled in FT’s favour. In 2009, FT had filed a suit against NSE for its decision to put ODIN on a ‘watch’ list. After complaints by brokers, NSE alleged FT wasn’t allowing inspection of software. A truce was reached after the Bombay High Court directed both parties to settle the issue amicably.

Front-end software market
The market for front-end software is a major one, if all segments, including, equities, derivatives, commodities and currencies, are considered. ODIN’s market share is 70-80 per cent. One of ODIN’s significant aspects is on a single screen, a broker can view all exchanges’ segments together, which makes trading easy.

Other prominent providers of similar software include Market Place Technologies, now with BSE; and Omnisys Technologies, in which NSE had 26 per cent stake earlier.

Fear factor
Brokers’ concerns are many. Sidharth Shah, chairman, BSE brokers’ Forum, said, “Our concern is based on the fact that there are many court cases underway in the NSEL case, in which FT is party, and there is a multi-agency probe and, therefore, FT-owned software ODIN should be protected by ring fencing its source code.”

The vital question is how
If the government acquires it, what will it do without the team that currently manages and upgrades it? Today, FT protects misuse and theft of the source code. If that is put into an escrow account, as some suggested, the risk of protecting it is transferred to the agent managing the escrow account. “These are even bigger challenges,” said an IT expert. The Act governing intellectual property rights favours the owner and developer of the code retaining it. As an exchange official who developed his own software for brokers says, the source code is a very pricey property and the higher the software’s user base, the higher the valuation of the code.

Similar software
Such is the importance of ODIN-like software that BSE acquired such a company; NSE, too, did so, before selling the stake with profit. Another commodity exchange, UCX, was promoted by Comex Technologies, which is into similar software for brokers. A few large brokers have developed their own software for trading.

B Gopkumar, head of broking, Kotak Securities, said, “For online terminals, we have developed our own software. In case ODIN software is phased out, we will immediately be able to plug into our software. The switchover would be done in less than a minute.”

ICICI Securities has also developed an in-house platform for trading; it doesn’t use the ODIN software for its terminals.

ODIN was introduced by FT in 1998. Subsequently, the market saw a revolution. Senior functionaries of the BSE Brokers Forum, which voiced concern, said they would prefer to use ODIN.