Anthony Malakian: Some Final Thoughts on the Messaging Space

The messaging space is both interesting ... and fairly predictable. You can read my feature about the topic on page 26, but here's the gist of it: Instant Bloomberg, thanks to its integration with the firm's ubiquitous Bloomberg terminals, will continue to dominate on Wall Street.

The fact is that at this point, the buy side won't easily let go of its terminals, given that it considers the messaging function to be absolutely vital.

So, end of story, right? Not so fast. There is a place for firms like Symphony when it comes to internal communications. When I went to Symphony's Manhattan offices and demoed the platform, I found it to be intuitive and easy to use. In fact, I wouldn't mind at all if Incisive Media used the platform so that everything that is sent internally could move away from email and onto the Symphony messaging platform, thus reducing the multitude of emails I have to read in the morning, some of which can get lost in the clutter. That is also where David Gurle, Symphony's CEO, sees the greatest opening for success.

(To read Anthony's feature on messaging's evolution, click here.)

But when you're a messaging provider catering to Wall Street, comparisons to Bloomberg are inevitable. And when you attract the attention of Senator Elizabeth Warren and other regulators, the burden of proof swings against you.

It seems odd to me-and other sources I spoke with-that Warren would target a startup like Symphony so publicly. I am inclined to believe that because Goldman Sachs is its highest profile backer, and because this messaging unit is being positioned in the media as a contender to a powerhouse like Bloomberg, that the Massachusetts senator had enough people bring the vendor to her attention.

Symphony's platform is on par with any other messaging platform that has come before it in terms of its data encryption, retention and deletion capabilities. But, again, the burden is now on Symphony to prove this point.

It doesn't have to displace Bloomberg; it simply has to find a home ─ perhaps pairing itself with the likes of Thomson Reuters, or to a lesser degree, Money.net ─ as a workflow solution that seamlessly integrates with other trading solutions.

The Big One

So this is a story of brand positioning, although here's where I think the next major development in messaging will come from: cyber-security. Waters has covered the cyber-security space in great detail, but one area we haven't explored is chat. As GoldenSource's CEO John Eley told me, "There's no doubt that all of these chat systems need to be super secure and encrypted. These are very casual conversations about pre- and post-trade information, so people need to be careful."

Another industry participant I spoke to on condition of anonymity has a slightly different take. "Some of Symphony's marketing pitch went against them, where they bit into the theme of, ‘nobody ever sees your messages.' From a regulator's perspective and most anybody in our industry, that's not a good soundbite. So their marketing got away from them a little bit. But ultimately, if they don't provide a safe and secure way of communicating, they're toast. They know that. At least they're doing it in a centralized, coordinated way, which is probably more resilient from a cyber-security perspective, rather than coming together ad hoc."

If hackers wanted to bring Wall Street to its knees, they could release a treasure trove of "chat," Ashley Madison style. The blowback would wreak havoc for years, with a wave of new regulations and standards to follow.

For regulators, it's vital to be able to use these conversations to prevent-or at least provide evidence of ─ the next Libor rate-fixing scandal. But it's equally important for messaging providers to ensure that these conversations are both compliant and secure against unwanted outsider intrusion. It is something of a fault line; the next big scandal is on its way ─ we just don't know when it'll hit.