Max Bowie: Are You Getting the Message?

For two days last month, our London office was effectively taken offline—first, when workers severed an ISDN cable in the street outside our office, cutting off all internet, phone, email and server access, and then when an explosion the following day at an adjacent power sub-station forced a building evacuation, preventing services from being restored. While our New York office still had local internet connectivity, our email servers in London remained down for the duration of the event, prompting our New York-based staff to leverage alternative communication platforms.

The financial markets are also showing a healthy interest in alternative messaging platforms, such as Markit’s Collaboration Services suite of messaging and chat tools, which recently signed up managed infrastructure hosting vendor Options and US investment bank Jefferies as participants.

Fortuitous Timing
The timing of Markit’s initiative—first announced last year—was fortuitous, following a snooping scandal at rival Bloomberg, whose messaging platform dominates the institutional sales and trader space. Some Bloomberg journalists had discovered a way to monitor certain client activity—such as user profiles, login histories, most commonly accessed functions and helpdesk chats—on the vendor’s Bloomberg Professional terminals. Though Bloomberg quickly disabled this ability and commissioned a report to recommend any further changes required, the scandal left some clients wary of what other activity Bloomberg might be able to monitor. More than one data professional contacted by Inside Market Data at the time was convinced that the vendor also kept tabs on their messaging chats, with some more willing to believe that news stories containing confidential information may have resulted from message snooping than to admit that their own ship might contain a few old-fashioned leaks.

It appears this suspicion has continued: In a recent poll conducted via the WatersTechnology.com website, we asked readers what enterprise messaging platform they expected to be using in one year’s time. While not a scientifically perfect sample, at the time of writing, Bloomberg had only received 4 percent of votes, compared to Thomson Reuters (with 53 percent) and Markit (with 23 percent), whose recent announcement about Jefferies may be a coincidence, or a deliberate show of strength in response to reports that a consortium of several Wall Street firms, notably including Goldman Sachs—which Bloomberg admitted its journalists had monitored, using login records to determine whether an individual still worked at the bank—are considering acquiring Palo Alto, Calif.-based Perzo, which provides a free secure messaging platform for individuals and enterprise clients. Indeed, 18 percent of respondents said they expect to use Perzo, if it is acquired by the consortium of banks.

As well as working at Avaya, Skype, and a host of telecom providers prior to founding Perzo two years ago, CEO David Gurlé spent seven years at Thomson Reuters as global head of collaboration services, and knows his way around the institutional enterprise space, as well as how to launch a service that fills a gap in the market that the market itself didn’t know existed.

Some data execs are more willing to believe that news stories containing confidential information may have resulted from message snooping than to admit that their own ship might contain a few old-fashioned leaks.

Opportunities
In today’s high-frequency age, you may wonder why there exists an opportunity for more competition around old-style messaging. The answer is simply that not all asset classes yet require that level of speed and automation. Trades in commodities, energy and over-the-counter block sizes in illiquid securities are frequently negotiated and agreed via messaging platforms. And that’s why the thought of prying eyes makes traders nervous, and why the prospect of encryption tools such as those offered by Perzo sounds so appealing. In the right hands, messaging platforms are a critical component of modern trading. In the wrong hands, they could conceivably offer a window into your trading strategies. The question is, who would you trust to clean that window—a third-party vendor, or someone owned by a bunch of rival firms?