Is all well between Cognotec and UBS?

The Dublin-based trading technology vendor is rumoured to be experiencing difficulties with its major client UBS over the development of a margin trading platform.

The bank is believed to have signed up Cognotec early last year to support the development of a multi-asset class margin trading system as part of a major technology upgrade across many components. The deal was viewed as a huge boon for the technology vendor, and supportive of the turnaround of the company seen since 2004.

Cognotec generated revenues of $28 million in 2005, up from $18 million in 2004 and $15.7 million in 2003. It said net profit after tax was $4 million that year, showing a turnaround from a reported operating loss of almost $3.5 million in 2003. Cognotec said net profits after tax for 2004 were $1.5 million. For 2006, the company was reportedly expecting to make revenues of more than $40 million.

Indeed in 2006, it began rolling out a new e-trading solutions platform aimed at bringing together all client segments and asset classes for banks. In May, it started the first phase with the launch of a margin trading platform called Real-Stream-Margin.

The system is an integrated web-based solution designed for banks looking to target the increasing growth in flows originating in the retail market by incorporating collateral management capabilities.

It is thought that components of this platform were being used by UBS for the launch of its margin trading system, which market sources say was due to go live in the second quarter of 2006.

However, according to market rumours, this hasn't happened, and Cognotec's relationship with UBS on this project is supposedly in doubt. It is thought that the platform could have been delivered but not to the satisfaction of the bank. A figure of around $10 million has also been linked to the deal.

Cognotec responded to the rumour by saying: "UBS has been and continues to be an important client and user of Cognotec's FX dealing technology."

Similarly, a spokesperson for UBS said: "Cognotec has been and continues to be an important supplier of FX dealing technology to UBS."

Whether the relationship on this particular project is in trouble remains just a rumour at this stage. And indeed, if a platform was delivered in some way, shape, or form, would it make sense to call off the deal altogether because it didn't entirely match expectations?