Context…it’s vitally important. In the capital markets, you can have all the data in the world, but without a way to connect the dots, the only thing you’ll get is a bill from your cloud provider at the end of the month with little alpha to show for it.
This here newsletter aims to provide you, dear reader, some context around the news we’ve reported over the past week and connect some of those dots for you. This will be a weekly thing that I’ll publish on Sundays, but the structure of this post might evolve over time…for now, I’m just winging it.
I always love hearing from our subscribers—even, and maybe especially if, it’s criticism. It’s important that we know what we’re doing right and what we got wrong. Don’t hesitate to reach out to me if you think there are ways that I can improve this in the future or if you disagree with my thoughts: firstname.lastname@example.org.
HPR Throws its Hat into the Market Data Arena
Before we talk market data, first, some back story.
Launched in 2011, HPR was once known as Hyannis Port Research. As someone who used to spend a week camping in Cape Cod every summer, I know Hyannis, Massachusetts, and it’s a lovely port town, but my guess is that most outside of the northeast USA were asking themselves, “What’s a ‘Hyannis Port?’” More importantly, though, was that the old name might have been a bit misleading. I’m speculating here, but Hyannis Port Research might have summoned the image of an equity research provider in many minds, instead of a hardcore hardware technology provider researching cutting-edge ways to conduct risk checks on US order flow.
Last year the Wall Street Journal wrote of the company, “This Little Black Box Does Heavy Lifting for Wall Street.” Now, I’m not saying that we’re trendsetters or nuthin’, but WSJ published that story three months after we had HPR founder and CEO Tony Amicangioli on the Waters Wavelength podcast…but I digress.
The point is that HPR had made its name as a hardware provider, but that isn’t necessarily the future of the company…or at least not in its entirety. With its 2018 launch of Omnibot, which serves as a low-latency switch, router, and pre-trade risk gateway, HPR began to move in a new direction. Omnibot leverages HPR’s Unimus management and control framework, which underpins the vendor’s entire solution set, including Riskbot, Softbot, and it’s soon-to-be-released Databot. As the company puts it, “Unimus marries HPR’s telecom, cloud, and capital markets microstructure expertise in both hardware and software to create a single platform on which a user’s entire CMI stack can be built.”
While Unimus has been around from the beginning, it would seem that HPR is now leveraging it to really grow its software/cloud suite of services. In an interview with me last week about the new market data solution, Amicangioli kept on stressing that he wants HPR to be a “one-stop shop” for users in the low-latency trading space. In order to be a one-stop shop, they needed to address clients’ market data needs.
“Historically, we haven’t been that interested in the data market because it’s been a crowded vendor space,” Amicangioli said. “We now believe, though, that by providing leading performance and the completeness [of a service], it will allow our clients to achieve better performance, reliability, and efficiency.”
For this new market data distribution appliance, HPR will first be available via a field-programmable gate array (FPGA), but soon after, it will roll out a software-based cloud solution. Amicangioli told me that hardware and FPGAs are still at the core of the HPR offering, but more and more individual users are looking for software solutions, especially for things that do not pertain to ultra-low-latency-trading needs. You can’t be a one-stop shop if you can’t address the whole pipeline of necessities.
This move reminds me a bit of the path that Trading Technologies (TT) has gone down. In 2014, TT first announced that it was going to sunset its flagship X_Trader monolith in favor of a SaaS-delivered platform. (BTW, click on that link to see the greatest headshot in the history of fintechs. I’m still pissed that Rick did away with it.)
Then, in 2018, TT began to journey away from just being a provider of trading tools for futures market participants, to covering screen-based execution products and data analytics, which led to its infrastructure-as-a-service (IaaS) offering. That led to TT rolling out an order management system (OMS) last year. And then this last May, TT unveiled its own market data gambit: Echo Chamber, which allows individual firms and groups of firms to see aggregated and anonymized order data in real time from more than 55 exchanges. Essentially, the platform combines futures contracts traded on different exchanges to provide a single view of each, no matter where the contract is traded.
Those earlier moves to a software platform set the table for TT to move into the market data space. I can’t help but see parallels to what HPR is attempting to do today.
So who will HPR look to compete with after it goes lives with Databot? The way I see it, the players include Arista (via its purchase of Metamako, which itself had bought xCelor’s hardware business), Fixnetix, Exblaze, Xilinx (via its acquisition of SolarFlare), Cisco, NovaSparks, and to an extent Exegy, though Exegy is also a vendor of market data, rather than solely switches and routers that deliver data.
The major cloud providers—i.e., Amazon Web Services, Google Cloud Platform, Microsoft Azure, and I’ll also throw in IBM Cloud—have made it easier and cheaper for firms to offer SaaS-based solutions, as well as store and analyze massive datasets. Part of this evolution is that tech providers are looking to catch up to cloud-native startups. I have no opinion as to whether or not HPR will be successful with this latest offering, but this move toward software makes complete sense considering current market conditions.
Let me steal something from my friend Max Bowie: “In the pursuit of new ways to eliminate latency from the market data distribution and trading processes, vendors have invested in hardware-acceleration technologies, such as FPGAs. But with commodity chips now giving specialist hardware a run for its money, has that investment been wasted, or does each still have a role to play?”
This is from an excellent deep-dive into the hardware v. software debate, but what I’ll say is this: I think that the havoc wrought by the Covid-19 outbreak has senior executives at older (established?) firms across the capital markets wondering if a move toward software will need to come sooner rather than later.
ChartIQ/Finsemble as Product; Cosaic as Company Name
Wow, that went long. I swear in the future, I’ll try and be more concise. When it comes to writing, I often fall into the Jed Bartlet school of thought: “In my house, anyone who used one word when they could have used 10 just isn’t trying hard.”
Aaaaaanyway, back to the news of the week. So, apparently company name changes are all the rage. (Y’all clearly don’t care for the fact it’s kind of a pain in the ass for us reporters when a company changes its name.) Similar to how Hyannis Port Research made its bones in the hardware space only to evolve into something bigger, ChartIQ’s original sole focus was charting technology. Then, in 2017, ChartIQ officially made a move into the desktop application interoperability space with the launch of Finsemble.
Well, with the success of Finsemble, it was almost like there were two companies in the same Charlottesville, Virginia house (formerly barn), so the company has rebranded itself as Cosaic. Dan Schleifer told Max Bowie that the company recognized the importance of retaining the brands, but the perception of each sometimes hampered the company’s efforts to grow the other business. So, for any client that only knows one side of the vendor’s business, Schleifer says, the change represents “an opportunity to reintroduce ourselves and demonstrate how we can support their strategic vision.”
Really, I think that Dan just made the name change because he wants to say he’s been the CEO of three different companies.
Last year, Citi became the first strategic investor in Finsemble. That funding round was an add-on strategic investment to the company’s early-2019 Series B funding round, which was led by German private equity firm Digital+ Partners and culminated in $17.4 million raised. Previous to that, ValueStream Ventures, Social Leverage, and Tribeca Angels contributed seed money, and there was $4 million raised in an earlier Series A round led by Illuminate Financial with participation from the seed investors and Asia Fintech Angels. Illuminate was also in on the Series B.
I haven’t spoken to any of those investment firms, but my guess is that they’re cool with Cosaic, so Cosaic it is. Excuse me for a couple hours while I go change the tags in our CMS.
More CME Regulatory Reporting News
The best reporters not only break news, but keep on examining every angle of the story, bleeding every last ounce of its meaning (context!). A prime example of this has been Josephine Gallagher’s recent coverage of the regulatory reporting space.
Back in mid-May, CME Group announced that it was going to scale back its regulatory reporting business, which includes the Abide Financial and NEX Regulatory Reporting businesses, and its European and Australian trade repositories (TRs).
In the course of reporting on that story, she heard rumors that Deutsche Börse was going to follow the CME’s lead—those rumors turned out to be true, and Jo was the first to report that. (Many journos would proclaim, “SCOOP!”, but we’re much too proud to do that sort of thing at WatersTechnology. Wait, did I just do that? Ah, shit.)
For her next act, Jo wanted to know why these strategic moves were happening. As execs from around the industry told her, it’s the result of pricing wars, unsustainable business models, and the realities of commercially supporting a regulatory reporting business. That led to the next logical question: What does that mean for the other TRs and reg reporting vendors in the space? Don’t worry, Jo’s got you covered with this deep-dive.
And she wasn’t done. This week, she reported that vendor SteelEye was in talks with CME to pluck several employees from CME’s regulatory reporting businesses.
SteelEye’s public strategy reminds me of how Itiviti has been looking to scoop up Bloomberg SSEOMS talent. Oh, and who broke the news that Bloomberg was exiting its SSEOMS business line? That was us…SCOOP!
Lazard Asset Management’s Covid Strategy
Speaking of Jo’s reporting, Lazard’s Paul Moghtader spoke with her about the asset manager’s Covid-19 data model, and how it’s been updated to more accurately reflect the health of corporates throughout the virus outbreak.
“Whether it’s balance sheet data or it’s other proprietary data that we have that doesn’t get updated as frequently, those are the things that are really concerning us in this environment. We don’t want to be misled by rapid changes in price, with other factors trailing, and so that’s where the proprietary work around Covid really came into play,” said the portfolio manager.
I want to keep this post under 2,000 words, but there’s a lot of interesting work going on in the coronavirus data space. Here are just a few examples that we’ve written about: Los Angeles Capital debuted a new factor for measuring stocks’ sensitivity to the pandemic; Northern Trust teamed with Enlighten Software to identify available resources as staff worked remotely; Facteus added real-time consumer spend data to its revenue predictor; Morgan Stanley used its AlphaWise unit to monitor the impact of Covid-19; UBS’s Evidence Lab is using machine learning to develop maritime datasets to monitoring shipping disruptions; and this week, Advan Research rolled out new datasets to provide investors with insight into which companies are opening locations and generating revenues, and which locations are receiving freight shipments.
Dammit, there’s more I want to say but I’m over 2k…we’ll chat more next weekend.
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