I don't know if there are any followers of this stock in here, but take a quick look - this has been moving up steadily. To add to the move it has been tipped in the Shares Magazine today.

PTS has been moving up very healthily since this last message - has no one noticed ???

These guys make trading systems for brokers - with a 50% increase in trading reported recently - the orders should be flooding in right now.

Worth getting in now, I would say - they sell the systems globally so anywhere there is a lot of trading going on we can expect PTS to make significant inroads.

PTS has started to break out folks - loads of upside to come on this one.

Here's the low down:

A new year, a new platform

Wall St Transcript interview with Kevin Ashby

Can we start with a quick update on Patsystems and your trading position as we move into 2004?

First, some background. Electronic trading is still relatively new in the derivatives industry. As with any new technology, user needs and experiences soon lead to further developments as the market begins to shape the product. Today we have outgrown, or will soon outgrow, our early trading systems. Because people are now familiar with these systems and can see their potential, they are beginning to demand greater throughput and flexibility, as well as better resilience and recovery. In other words, our customers now want industrial strength computing for derivatives.

We realized that expectations would change and decided a little over a year ago to start a project that involves nearly 70-man years effort. That project will provide the industrial strength platform that the marketplace needs. As we begin 2004, we are preparing to launch our new platform.

Having talked not just to our existing customers, but also to other major financial institutions, I think weve got the timing right. Many companies chose to develop their own systems when the markets took off, rather than rely on a packaged solution from a vendor. Now they are questioning the wisdom of that decision and are looking for an external platform. Of course, when major financial institutions invest in technology, they expect industrial strength: they want a platform thats scalable, powerful and durable. Which is precisely what we offer a new trading platform at the right time for the market and with the right level of investment to satisfy customer needs. We will begin customer trials in the early part of this year.

Is there any early indication of customer responsiveness to this platform?

Ive worked in other industries where the last thing people want is to be the first to try something; they want you to test a system on someone else. Im sure thats also true in parts of this industry, but what amazes me is the number of individuals or organizations that have said they are interested in being early adopters, even if it means being a guinea pig. They are saying: If what youve developed is as good as we think it is, and it will give us a leapfrog position, we want to be at the head of the queue. Yes, we have a lot of enthusiasm, a lot of people who want to be part of our test programme. In addition, we have involved many of them in the design process because, apart from a new distribution platform, we are also marketing new trading tools. One is aimed at the retail market, one at the professional broker, and one at the multi-client broker desk. So its not just a new platform but also a range of different tools, all developed in close association with potential users and therefore tied to their needs.

What are the benefits of the platform? How does it differ from your competitors' platforms?

There are a number of distinctive and distinguishing features. Above all, speed and power and by power I mean the flexibility, scalability and resilience of the platform. For example, a major financial institution with one system in London and another system in New York can have a global order book, which means they can have all their customers registered on both systems. Theres no problem if one system fails, because the other one will cut in and continue processing. If they have two telephone links into LIFFE and one link goes down, our platform will both automatically reroute and automatically manage processing. It has a wide range of internal management tools to help major financial institutions to manage their environment and provide a higher level of availability. Think about it: if a banks cash network goes down, its a public embarrassment. However, if your trading system goes down and your customers dont know their positions in the market, not only will it mean unwelcome column inches, youll also lose your customers. Thats why we have made reliability and availability fundamental to the new platform. And, as I have already mentioned, we are developing a new range of trading tools for different customers. Our platform therefore caters for a wide variety of needs. Finally, we will continue to differentiate and refine our platform by co-operating with third parties that can add functionality to the platform. On our current platform, for example, we already have some 250 third-party software developments.

How will the platform change your business? Does it mean that Patsystems is evolving into something else?

Our existing customers would see it as a natural evolution. Weve listened to what they want, weve looked closely at the markets today and how they are likely to develop, and weve used this experience to shape our new platform. Some of our prospects, and particularly the major financial institutions, might call it a revolution rather than an evolution, because until now there has never been a platform with the breadth and the depth that they require. As I said before, its an industrial strength solution. Moreover, industrial strength combined with diversity. We recently announced that we are supporting foreign exchange through a contract with IFX, which is a first step towards widening the range of asset classes that we can support. Our aim is to provide a platform that meets all shades of trading.

How can investors judge the potential of the platform? What are the key indicators for a successful launch and implementation of the platform in the trading community?

Well pilot parts of the platform with our customers throughout the first quarter of 2004, so you can expect feedback from the market, but you will have to wait until our second quarter results to see how this translates into sales. Although we may see sales in the first quarter, I prefer to be cautious. However, who can predict exactly what will happen? Having developed a platform that is so closely tied to market needs, and unlike anything else available today, it will be fascinating to see what happens when its unveiled and rolled out. One thing is for sure, because the initial reaction of customers has been very positive, well be very happy if we can convert the high level of interest into sales. Remember though, our business model is based on third-party distribution. When we sell our system to a customer, they in turn must sell it to their customers. So theres a chain: our revenue derives from our customers revenue, which means a time lag in terms of cash flow. Whatever the curve for sales, Im confident that by the end of the first two quarters well have some very encouraging news for our shareholders, as well as the market as a whole.

Do you think the investment community has an appropriate understanding of your business?

The vast majority of our investors have a pretty good understanding. We have some 14 institutional investors and have spent a fair amount of time over the last few months talking to them, so they have a very good understanding of what we do. Outside that group, the majority of the major investors have been with the company for a very long time. Therefore, only a relatively small proportion of our shareholders has a weak understanding of our business. What amazes me is how often I meet traders who tell me that they are also Patsystems shareholders.

A few months ago we started to get very serious interest from major financial institutions. We spoke to a number of them who look after investments for private individuals and they felt that because our share price had shot from four to 16, the growth was gone and therefore they were not interested. Conversely, the major investment houses, which werent interested when our share price was four, started to take notice when we jumped to 16. That was because we demonstrated growth, proved that we can move the company forward, and had a clear plan for the future. They saw the growth and planning as a key stage in the companys evolution and an indication of things to come.

How does Patsystems' matching engine business fit in with the overall service offering?

Thats one of the most interesting areas of our business. Apart from our traditional role of providing matching engine technology to the exchanges, we are finding new ways to use the matching engine and enhance our service offering. One way is by using the technology as part of a simulation tool. In 2003, we launched a trading simulator called J-Simulator which allows you to trade on our system in real market conditions against real prices. Its authentic trading right up to the point where money exchanges hands, but because trades are on paper only, theres no risk: you learn without loss. Our matching engine is the technology that drives the simulator.

There are also potential prospects with organizations seeking some form of trade internalization or that want to create a new electronic product for example, taking warrants or even foreign exchange. We are talking to quite a few companies, so theres plenty of scope to widen the role for our matching engine by creating and hosting new products. Im very pleased that weve been able to take technology that was previously just for exchanges and make it an integral part of our trading platform. Many of our customers are now discovering how they can use that technology to create new products in new markets.

Elaborate on your sales model and route to market

Our end users, the people who sit in front of the screens and enter trades, are not the usual targets for our marketing. Our global sales team focuses on brokers, future commission merchants, banks and other financial institutions. We do business with companies such as Man, Lehman, Refco, and Cargill, the companies that then use our technology to provide services to their customers. That said, we are also raising brand awareness with our end users. Through trade shows, adverts and marketing literature, we reach out to traders of all descriptions, not just the organizations that distribute our products. Our customers customers are also our customers, so we definitely want them to be aware of Patsystems and to ask for us by name.

What are the main strategic objectives for your company over the next couple of years?

The clear goal for 2004 and beyond is to fully establish the new platform. During development we referred to the platform as Patsystems 2: Enterprise Edition, which was a working title, but well shortly be announcing the brand name. Our aim is to make the platform the market leader, the pre-eminent platform in our marketplace, and to underline that it will evolve into a multi-asset platform. Research shows that multi-asset capability is what traders want from next generation platforms, and we intend to be first in that field.

What about other trading in multiple geographies? Is that something you see traders embracing?

I think it will happen and I believe that initiatives like Eurex US will hasten the change. But its very difficult to make hard and fast predictions. On the one hand, you can say that people always change habits much slower than you anticipate. On the other hand, remember that rapid move from LIFFE to Eurex.. My guess is that it will be slower than some might think, and, because of regional differences, not uniform. In Sydney, where Ive just been, many traders primarily trade the local exchange. But, if you go to Singapore, traders are doing business everywhere but the local exchange they trade globally. I think that in Europe, where electronic trading is more advanced, youll find trade across more geographies and exchanges, but theres also the time zone advantage. If you are in Asia Pacific, for example, its more difficult to trade Chicago. In Chicago you tend to find many more people who still trade the same contracts that they did during their floor days. What works well in one region may not work so well in another, so its really a case of horses for courses. The capability for truly international trade is here, and I think it will become more common to trade across borders as people see opportunities or as the marketplace in their current product becomes tight. The big question is how quickly will it happen and what products will be the most popular. Well have to wait and see.

You mentioned Eurex US. Whats your view of the new market and the recently announced agreement between Eurex US and Trading Technologies?

We see the arrival of Eurex US as an excellent opportunity and one more step towards global electronic trade. We are ready for the start of trading and have created a new Exchange-Specific Adapter (ESA) that our customers will install to provide Eurex US connectivity and functionality from day one. All Patsystems front-end users will have full access from the proposed launch, 1 February 2004, and at no extra cost.

As for the agreement between Trading Technologies and Eurex, I think its essential for software vendors to maintain their independence. Thanks to the development of the ISV programme we have a wide range of trading systems available to exchange end users, and this has stimulated the huge growth in exchange-traded volume in recent years. Competition and variety lead to quality and innovation, so we must ensure that we dont compromise the principle of a level playing field. Our position is clear: we are committed to preserving a free and open trading environment.

What does the competitor environment look like/

It is very unusual. In the retail space, for instance, we dont encounter much competition. But thats just one segment. In the professional marketplace, Chicago-based Trading Technologies is a formidable competitor, primarily in the Chicago and European landscapes. TT doesnt really participate in Asia Pacific, which is where GL is a very substantial competitor. There are other players in different niches, but no direct competition in terms of where Patsystems stands today. If we were trying to sell our products into a marketplace where the primary need is options trading, then we come up against very strong competition from companies such as RTS. In the last year or so, although we have had occasions when customers have not gone ahead with projects, overall we have been very successful in our space. There have been only two occasions when weve lost a project in open bid.

Whats the challenge for your company at this point? Is anything giving you cause for concern?

We have many opportunities at the moment too many and its impossible to grasp them all; indeed, it would be dangerous to try. While its far better to have too many opportunities rather than too few, we need to focus on the projects that will be crucial to Patsystems future. Theres no point bidding for 20 projects and then end up with none. We have to be very selective.

Is your senior management team now complete? Do you have all the skills you need?

Yes. We are also developing the skills that will help us to move into major financial institutions, a sector with a different set of customers and different requirements. We now have a very broad range of skills and experience in Patsystems, and certainly the talent to move comfortably into new areas. One of the great things about Patsystems is the enthusiasm, commitment and drive of the staff.

Where do you spend most of your time?

Probably Terminal 4 at Heathrow. Ive just returned from two weeks in Shanghai, Hong Kong, Bangkok, and Australia. Before that, I went to Japan and Singapore, with a visit to Chicago in between. And just before Christmas I spent another week in Chicago. As a company, we have a lot of ground to cover. We recently recruited more staff in New York because Pat Kenny, who runs our American operation and who is based in Chicago, was spending too much time travelling to New York. Perversely, because an increase in staff numbers has led to an increase in opportunities, Pat is once again commuting. As CEO, I think its very important to meet existing and potential customers wherever they are in the world. If I know people before they sign with Patsystems its easier to deal with them once they are customers. In this case, familiarity helps to breed content. The closer you are to your customers, the easier it is to manage expectations and resolve any problems. Building good relationships is vital to our business, and at Patsystems we pride ourselves on the quality of our customer support. Indeed, its one of our competitive advantages and will be a key part of our corporate culture when we launch our new platform.

Where would you like to see Patsystems positioned three to five years from now?

We need to move in two directions. One is to widen the range of asset classes that we support, because people who trade derivatives increasingly want the security of a forex hedge, or perhaps to trade in the underlying equity. We also need to strengthen our service offering by ensuring that our platform supports a wide variety of value-added applications. That will give our customers the flexibility to create different Patsystems environments, ie, they can customize their environments to suit their needs. And how will we achieve this? Through a combination of organic growth and acquisitions.

Have you been involved in acquisitions previously?

Patsystems has a history of making acquisitions, but not managing them very well. When I joined the company in September 2002 I wanted to spend my first year eliminating our weaknesses and building on our strengths. We needed to focus on how we managed our business before considering further acquisitions and increasing our commitments. Today, having reorganized our business, we are in a much better position to think about acquisitions.

What summary statement you would like to leave an investor with?

Watch this space cliched but never more apt.

is there anything you would like to add?

We are in an exciting, changing marketplace. There is an irresistible momentum towards electronic trade, which means many opportunities for software vendors. In five years the electronic marketplace will be far more competitive, far more complex. The long-term winners will be the companies that invest in the right technology now and anticipate traders needs. Companies like Patsystems.

This article was created on January 15, 2004

Sector Analysis note rates Patsystems as a strong buy:

http://www.corporatesynergy.co.uk/index.asp?pageID=15#23

A meaty 300K buy after the bell - bodes well for tomorrow.

Selling pressure has all gone now - the news today should give us another healthy rise over the next couple of days. Good time to buy, or one for the watch list if you're not yet convinced.

Rumour has it that a major European Bank has just signed a contract with PTS - keep an eye on the news.

They continue to go onwards and upwards:

It's good to see that PTS has suddenly sprung back into life today. Reportedly, tipped in Red Hot Penny Shares with a target of 52p.

Yes, it was tipped in RHPS recieved on Sat along with Surface Transforms (SCE) and both shares shot up Monday morning.

Apparently, the press reckon that another major deal is about to be signed also and this is helping to keep the price up.