There are three initiatives for London market interconnection but two are being held back, says Mike Anstee
It might be difficult to justify internal IT projects, but it is almost impossible to find financial justification to support London market initiatives.
It is therefore not surprising that the current market initiatives, like those that have gone before, are being justified as an act of faith by well-meaning chief executives in an attempt to "deliver market efficiencies that will streamline processing and drive significant duplication of effort and cost from the market".
It has been this quest for common processing and the associated nebulous efficiency and cost savings that has led to past failures.
We seldom seem to move from the activities of the small group of founder members to the mass take-up of the solution. The prime problem is the length of time it takes to get some form of market agreement and then to build anything significant enough to win over the critics and detractors.
With this delay we sometimes lose sight of the objectives, so costs spiral and the benefits seem to evaporate.
So are today's London market projects still addressing the real issues? We are asked to see the three separate initiatives as some sort of composition where there are symbiotic relationships involved.
Yes, XIS needs new London market principles (LMP) processes to be networked to enhance services and derive additional income. LMP relies on XIS to support and control data flows.
But Kinnect can either stand or fall alone. In fact, its very existence could be preventing or limiting the opportunities of the other two initiatives, which in turn could be undermining, rather than supporting, the market.
LMP, after a slow and difficult start, now seems to be delivering. It has a structure, framework and sufficient experienced supporters to be successful in 2005.
XIS has taken too long to find its feet and align the market requirements with its own commercial ambitions. Recently-announced changes to the physical network next autumn, with the move to XDH, will reduce costs and provide a better platform. The experience that staff and management have gained should allow it to deliver improved services in 2005.
Kinnect is by far the least commercially attractive and less well thought through initiative in the market. It is the latest in a long line of trusted trading platforms and has still to convince most in the market that it can deliver a cost effective solution. Unfortunately, the message is still unclear, progress is slow and the projected costs too high.
With 2007 scheduled for volume delivery there is time to carry out a full review of Kinnect's business strategy and convince ourselves that this is what the market will need by then, that Kinnect is uniquely positioned to deliver it and the market can afford it.
My own feeling is that the market should concentrate its efforts and invest more money in extending LMP, expanding XIS services and embracing the Acord standards fully. Dis-Kinnect and allow market forces to occupy the placing space IT
' Mike Anstee is a consultant with Hindsight Partnership and a non-executive director of Sirius Financial Solutions