Stu Taylor, chief executive of Algomi, said banks have become more comfortable using the cloud allowing the fintech company to provide its bond information network as a software as a service offering.
In August Algomi launched its sellside platform, Synchronicity, as a software as a service solution. When Algomi launched it built internal networks for banks to connect together staff who could help transact less liquid corporate bonds but the firm has since added asset managers to its Honeycomb network so they can easily and quickly find the best bank to execute large trades.
Taylor told Markets Media: “Banks have become increasingly embracing of cloud solutions. We use Amazon web services and a few years ago that would not have been palatable.”
Software as a service means banks need to devote far fewer internal resources, and reduced fixed costs, in adopting Algomi as the project moves from a capital to an operational expense. Each bank is on a separate encrypted server stack managed by Algomi to meet international data standards on a secure scalable service hosted by Amazon.
“The SaaS offering has been received very enthusiastically and contract negotiations in the double digits have begun with banks,” added Taylor. “Installation used to take four to six months but now we can onboard banks in approximately four weeks.”
Brad Bailey, research director, Securities and Investments Group, at consultancy Celent said in a report last month that the cloud is the most profound disruptor in allowing the fintech revolution to occur in capital markets.
“Cloud enables a lower cost of failure, shifting capex to variable costing, and demand based usage,” said Bailey. “More importantly it allows better data models for analytical insight across the capital market value chain.”
Bailey continued that larger investment banks and brokers are investigating, planning, and considering the risk, security, encryption, regulatory, privacy, and cost implications for moving certain workloads to outsourced infrastructure models.
“The “We will never use the cloud” attitude of three years ago has moved to the maybe camp as key vendors become more focused on the particular needs and regulatory restrictions of capital market firms,” added Bailey.
The Celent report said the ability of fintech firms to bring innovative business models increases if they can deploy cloud-based technology to increase their speed to market speed and use new APIs to collaborate more easily with both incumbents and clients.
Taylor added: “This technology was not available two to three years ago and it is a real innovation that we have been able to take advantage of.”
The Desk’s Trading Intentions Survey 2016 found that the platforms currently most effective at sourcing liquidity were Bloomberg and then MarketAxess as a close second, followed by Tradeweb, Algomi and then Liquidnet. The Desk survey had 70 responses from North American, European and emerging market credit desks spread across 34 investment managers, with an aggregate of €15.4 trillion in assets under management.
Liquidnet, Algomi and Neptune were also first, second and third choice for the second year running as the platforms that traders plan to use. The Desk said: “It is worth noting that many of the most successful models are not those which aggregate actionable liquidity. The services provided by Algomi, Neptune and B2SCAN all focus on the use of information to support where to trade rather than offering a venue to introduce the platforms as with request for quote systems, or any auction or order book.”
In September Algomi said it had more than 200 fund managers on its network. There were more than 10,000 buyside indications of interest, with an average size of more than $7m, covering $75bn of live buyside volume.