By: Samuel Belden, Forefront Communications
Originally published on TabbFORUM
Here is a look at how five Wall Street firms in different parts of the market handled the difficulties associated with the pandemic and remote work. They include an agency broker, a market maker, a block trading venue, a risk management provider and a market data solutions provider.
There are certain years that stand out in the collective memory of the financial services industry: 1929, 2000, 2008. Although we’re just over two-thirds of the way through the year, 2020 is poised to join this group. The coronavirus pandemic led to unprecedented spikes in volumes and volatility in markets around the world, while also forcing most capital markets employees to work from home, creating a two-pronged crisis for investors and the firms who service them.
In times of turmoil, these companies take on even greater importance, and the past few months have been no exception. With markets moving at a dizzying pace, the margin for error is that much smaller. Fortunately, firms across the industry have risen to the occasion, proving their worth amid difficult conditions and ultimately helping their clients weather the worst of the storm.
Today, we’ll profile five financial companies and the issues they faced during this period and how they coped as an organization both internally and externally. Firms profiled include an agency broker, a market maker, a block trading venue, a risk management provider and a market data solutions provider.
DASH Financial Technologies
Along with the skyrocketing volumes and volatility, the closure of physical trading floors due to social distancing guidelines was a disruptive result of the pandemic. Enter DASH Financial Technologies, an agency-only brokerage and technology provider that played a vital role in keeping the markets humming, particularly between mid-March and May 4, when all physical options trading floors in the US were closed.
DASH is the leading provider of option trading technology, so when the markets became 100% electronic, the firm rose to the occasion, serving as the go-to provider for much of the options space. In particular, with orders unable to be crossed on the floor, their electronic crossing algorithms played a huge role in helping their interdealer broker (IDB) clients access liquidity and carry out their strategies with precision amid uncertain conditions.
“Crossing is critical functionality for IDBs and when the floors shut down many needed a way to cross electronically on just a couple days’ notice. Our sales team was able to quickly shift their focus and make sure our clients had the tools and education they needed to still be able to effectively service their clients,” said Stino Milito, Co-Chief Operating Officer at DASH. “Our executed market share increased to nearly 20% while the floors were shut down.”
Perhaps one reason why DASH has been able to thrive was their quick action in response to the pandemic. By securing extra equipment and ensuring that their staff had sufficient work-from-home setups in the early going, the firm had an easier adjustment to the new normal.
“One of our biggest concerns was the feasibility of remote operations for our trade desk, normally accustomed to working in close proximity to one another. The team transitioned seamlessly from working together in an office, where communication and visibility is unencumbered, to the majority working remotely. The team’s performance has exceeded expectations,” said Milito. “Like many other companies, we rely heavily on video conferencing solutions such as Zoom and BlueJeans and they have proven to be reliable and efficient for our team.”
It’s one of the paradoxes of turbulent markets – in times of high volumes and volatility, the importance of risk management is magnified. The pandemic stretched compliance staffs even more thinly. Eventus Systems, a provider of trade surveillance and market risk solutions to a broad range of financial institutions, aided clients in solving this issue during the pandemic.
The company’s Validus platform is at the center of these efforts. Validus tracks and monitors critical actions that concern regulators and analyzes key risk metrics firm-wide, streamlining some of the compliance burden. This uniting of surveillance and risk management capabilities became more critical as the markets went wild. Validus offers several key functionalities that have paid major dividends for clients over the past few months.
“Our clients have certainly benefitted from the AI/machine learning capabilities we’ve built into Validus, which help cut through a lot of the alert noise and bring to the forefront the most actionable surveillance alerts,” said Travis Schwab, CEO of Eventus. “We also built the Validus platform to quickly scale as demand increases. This approach served our clients well starting in Q1 when market messaging rates skyrocketed, as we were able to quickly respond via allocating additional infrastructure to run the software, seamless to clients.”
As markets around the globe become subject to increasing regulation, Eventus continues to pour resources into Validus. It is actively surveilling more than 100 markets across equities, options, futures, FX, fixed income and digital assets, and is actively working on additional asset classes, said Schwab. It also continues to add more market centers and additional self-directed capabilities like bespoke reporting and analytics.
While Eventus was no stranger to remote work, having always been virtual, the new normal has still required an adjustment. However, the firm is making the most of it, leaning into some of the digital channels that have played a key role in fostering continued connections.
“We’ve been fairly active as our industry has embraced various virtual events. We’ve hosted webinars, webcasts, podcasts and have also sponsored and/or participated in a handful of virtual conferences as well, so we’re adapting our business where needed,” said Schwab.
Heightened volumes have been one of the defining characteristics of the markets during the coronavirus pandemic. This phenomenon has been present in venues of all descriptions, from the major exchanges to a less expected arena: block trading. Luminex, a large-block trading venue, was ready on the frontlines.
“The buy side was seeking liquidity on both sides of the market, so it was not surprising that equity volumes more than doubled, but so did block volume and that was unexpected,” said Jonathan Clark, CEO of Luminex. “Buy-side firms were eager to trade stock quickly in order to minimize impact costs associated with market risk.”
These conditions, combined with Luminex’s focus as a provider of natural block liquidity, have led to a highly successful period, says Clark. Since March, the average trade size has been nearly 42,000 shares and the average block size (trades of more than 10,000 shares) has been approximately 56,000 shares.
This has necessitated a seamless transition to remote work, with Luminex greenlighting a “whatever you can carry” equipment policy for its employees. The firm has also made a concerted push to foster continued communication among employees.
“With most of our team working remote, staying in touch is more important than ever,” said Clark. “We have a core group that does so via all-day Zoom video, and twice a week we gather the whole team together to catch up and touch base.”
New York-based Old Mission is a global, multi-asset class market-making firm that trades virtually every exchange-listed asset class. Since its founding a decade ago, Old Mission has earned a reputation as a go-to firm for many of the hardest-to-price and most illiquid ETFs.
Old Mission navigated this year’s extreme market conditions and supported some of the hardest hit ETF sectors – such as oil, fixed income and metals – by fulfilling its role as a market maker. In the face of unprecedented market stress and uncertainty, Old Mission showed up every day willing to make markets.
During this challenging time, the company had to quickly adapt to the increased volatility while prioritizing the well-being of its employees. Teams were dispersed, with some working from the office and others working remotely. Those who continued to work out of the office did so with CDC recommended safeguards in place.
Like all businesses dealing with the unavoidable distribution of their staffs, timely communication became more important than ever. Monday night Zoom social hours were created to keep employees visually in touch with one another while also boosting morale.
Erica Marquez Avitia, Old Mission’s Chief Operating Officer, attributes the company’s ability to avoid operational disruption to the lightning-fast decision-making, flexibility and dedication of its employees.
“Being a tight-knit firm with a flat hierarchy, decisions were made and executed in a timely fashion,” said Marquez Avitia. “Going from a fully in-person firm to 50% remote at the start of the pandemic was a mandate but options were given to all employees to accommodate their individual needs and safety. The CEO himself measured each desk to make sure staff were six feet apart.”
The employees at Old Mission battled through the most challenging trading days as a team and came out on the other side more tightly aligned. Employee appreciation was a theme from this summer that staff – having withstood these challenges together – are carrying into the future.
While no firm was spared from the effects of the pandemic, there’s no doubt that some were more negatively impacted than others. For early-stage fintechs, securing funding is often as important a priority as the product or service itself, and unforeseen circumstances can lead to significant cost pressures.
That’s why Xignite, a provider of market data distribution and management solutions for fintechs and financial institutions, put these companies at the forefront of its response to the pandemic. Xignite recently launched a new program to deliver its financial data cloud APIs to early-stage fintechs, giving them access to a wide range of data — real-time, 15-minute delayed and end-of-day stock prices, company data, currency exchange rates, indices, corporate actions and master data – at a significantly reduced rate.
“There are so many young startups out there that are revolutionizing the financial services industry, and we were eager to play any role we could in helping them continue their work,” said Stephane Dubois, CEO and Founder of Xignite. “With our new program, accessing diverse sets of market and financial data will no longer be a hurdle for these companies.”
In addition, Xignite enhanced two of its cloud APIs, making it easier for end users to access news headlines and earnings call insights – actions that have taken on greater importance amid the pandemic. This ability to react quickly to the needs of its clients enabled Xignite to reach new heights; in April alone, it saw over 12 billion API hits a day, setting a new record.
In addition to these new initiatives, Xignite’s workforce is spread across the country, so moving to a fully remote environment was a seamless process.
Editor’s Note: The firms featured above are clients of Forefront Communications.
Eventus Systems is a leading global provider of multi-asset class trade surveillance and market risk solutions. Its powerful, award-winning Validus platform is easy to deploy, customize and operate across equities, options, futures, foreign exchange (FX), fixed income and digital asset markets. Validus is proven in the most complex, high-volume and real-time environments of tier-1 banks, brokerages, futures commission merchants (FCMs), clearing firms, trading firms, market centers, buy-side institutions and corporates. The company’s rapidly growing client base of more than 60 firms relies on Validus and Eventus’ responsive support and product development teams to overcome its most pressing regulatory challenges. For more, visit www.eventus.com.