Talking financial IT with Firm58
Broker dealers still relying on spreadsheets to keep track of trades and post-trade analysis need to listen up – Firm58 want to shed some light on their innovative back-office technology that helps firms manage complex post-trade requirements.
Firm58 is a Chicago-based financial management software company that offers post-trade operations for capital markets firms. The company’s software helps to improve efficiency, profitability and compliance in the back office.
Firm58 recognised a serious gap in the need for reliable, back-office automation solutions for the capital markets industry. This gap came from the growth of electronic communication networks (ECNs), which presented new challenges for manual and outdated middle- and back-office systems.
With news of Virtu Financial‘s relaunched IPO making headlines, we sat down with Firm58 CEO and President Nick Fera to talk all things financial IT and what the IPO means for the finance IT space.
JAXenter: It’s widely believed that traditional finance enterprises mostly remain entrenched in their old reliable technologies. Have you ever encountered resistance with regard to the innovation of finance technology?
Nick Fera: That statement reflects a part of the industry, and even within it, a part of their enterprise. What I mean by that is large, successful and growing financial enterprises are always looking for an “edge” in capital markets. Whether it be speed, information, or execution, everyone is looking for an edge to do it better, faster and more profitably. So technology investments to support this remain active.
Investments in other technologies to better support a financial enterprise will sometimes get overshadowed by the necessity of addressing regulations, compliance and security. These can sometimes drown out investments in middle and back office technologies that can support the growth of a business, but they lack the time, resources, or both to implement. Overall, however, Capital Markets firms are among the most active investors in new technologies of any industry.
How important is innovation in the financial space and particularly in the capital markets industry?
Innovation to achieve greater profits and returns mean everything to capital markets firms. In the past 15 years, we’ve moved from analog to digital, and from fractions to decimals. So time has shortened and margins are squeezed.
“Innovation to achieve greater profits and returns
mean everything to capital markets firms”
Firms need to find new and better ways to make profits and reduce execution fees without sacrificing security and compliance. As markets continue to transition to digital and other asset classes become exchanged cleared, technology innovation will always be a driving factor in capital markets.
Firm58 says that it leverages the back office for post-trade process improvements. Can you tell us a bit about the technology required to do this?
Firm58 has a unique and robust platform that sits on top of a scalable, automated transaction capture engine, a sophisticated and managed (US Equity and Option fees) rating engine, multi-asset library (sometimes called a security master), and a financial ledger for recording and reporting. We use these common services to help our clients review and analyze all of their trades in a given day, month, or year, and then help them Invoice their clients for the brokered transactions, measure the execution expense of each trade, measure the profitability of their client relationships and business as a whole, and stay in compliance with market access rules (e.g. Spoofing, layering, wash sales, etc.).
It is also used by many of our clients to support their loyalty programs with their own clients, also referred to as Commission Share Agreements or Soft Dollar agreements. Altogether, we processed nearly one billion transactions for our clients last year. We support the billing effort of several major equity option exchanges and the billing or expense management of some of the largest brokers on Wall Street.
What technology stacks do you currently employ? Is the customer-facing portal separate?
Our technology is built on Oracle and Java. The front end portals our customers use to log in are all on the same platform. The solution is a SaaS based solution, hosted in a world class, secure, and power redundant data center in Chicago, where we are based.
What would you say are the main differences between programming for finance tech and other enterprise technologies?
I think there are three main differences:
(a) Speed/Timing – everything needs to move quickly to keep up with markets, events and prices.
(b) Compliance and Testing – technologies that are put into place in Capital Markets need to be robustly tested to insure they won’t compromise a firm, an investor or the market. Testing this is incredibly hard.
(c) Security – solutions have to be secure to protect individuals and firms from fraud or theft. There is no margin for error.
What has Virtu Financial’s re-launched IPO meant for Firm58 and its customers?
The indirect impact is that it highlights a growing investment in the capital markets industry, the need to keep up, maintain and enhance the margins in one’s business with supportive software to monitor the growing volumes of trades, or they won’t be in business very long.