DJM's Risk Management Unit Faces The Axe Under Restructuring Plans

DOW Jones Markets (DJM) is closing down its nascent risk management division, according to sources close to the vendor. The move follows cutbacks at DJM after its parent Dow Jones & Company abandoned its ambitious three-year plan to revitalise the former Telerate with a $650 million investment.

Despite heavy reporting on the drama at DJM (Inside Market Data, November 27), sources say staff have not been officially informed of the aborted $650 million investment or any possible sale of the company. Sales and marketing of DJM products haven't stopped either.

However, research and development projects that were being funded by the $650 million have been shut down -- and sources say staff have had their Christmas bonuses frozen.

"We feel a bit betrayed by the senior management," comments one DJM source. "A lot of us were head hunted with the promise of this $650 million."

DJM's risk management unit will be next for the chopping block, sources add. Industry observers haven't been surprised by this decision. Even sources within the vendor say the executives put in charge of the risk management unit didn't understand the complexities of modern risk management.

It isn't yet clear how the death of DJM's risk unit will affect the Beast, a Java-coded derivatives analytic engine developed by CastleNet, the recently launched software subsidiary of Tullett & Tokyo Forex.

Earlier this year, DJM paid CastleNet some $25 million for the rights to distribute the Beast with its planned next-generation Internet-friendly 32-bit Microsoft Windows NT market data systems (Derivatives & Risk Technology, September 15). Sources say several risk management experts within DJM had warned the vendor not to buy the Beast.

Sources say that a senior management cull is now being carried out at DJM. A handful of managers will receive redundancy notices during the first few weeks of this month, these sources add.

Dow Jones is now planning to sell DJM to one of a variety of bidders. Sources say these include Primark, Thomson Financial, ABN Amro Bank or Welsh Carson.

Industry observers say Primark is the favourite to win the DJM business. They doubt if a management buyout led by senior vice president Gregory Smith will be successful.

Formed last year

DJM -- or Telerate, as it was then known -- formed its risk management unit services group last year (RMO, March 11, 1996).

The group's aim was to develop risk management services for buyside firms that could be delivered over DJM's network to customers' workstations. One early beta site for the service was Atlantic TSA, the California-based hedge fund (RMO, May 6, 1996).

Over the course of 1996, the vendor signed several alliances with other risk management systems providers, including Zainet Software (RMO, August 26, 1996) and Storm Technology (RMO, October 7, 1996).

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