Filet Stakes Claim on London

Filet: We only have 5 percent of our turnover generated in France, with the rest split between our offices in London, New York and Chicago.

IMD: And you are based in London?

Filet: That's right. I am based in London because of our strong growth in the UK. However, in terms of our technical development team, I am very happy to keep them in Paris because I feel that we have a real advantage in maintaining a research and development center in France.

IMD: In terms of skills and costs?

Filet: Certainly in terms of skillsets. French software engineers are very well regarded, and we have strong relationships with the top schools in France that allow us to get access to excellent talent. Although net wages also tend to be lower in France, this benefit is cancelled out by taxes, so the overall cost tends to be similar.

IMD: How is the shareholder structure at QuantHouse broken out?

Filet: Newedge [the broker formed by the merger of Société Générale's Fimat brokerage and Calyon] currently owns a 25 percent stake in the business. We also have a family office named Corniche Group that holds roughly 10 percent. The rest is owned by the founders and employees.

IMD: Do you continue to share office space with Newedge in London?

Filet: Not for a long time, although they helped us at the beginning. Before I founded QuantHouse, I ran a hedge fund pursuing futures and options arbitrage strategies. At that time, Fimat-which is now Newedge-was our prime broker. They saw that we were hitting the market first every time with our technology, so they turned to us and suggested that if we wanted to switch our business and focus on providing technology, then they would be a willing investor. Since then, they have been acting like a regular venture capital investor.

IMD: Are they also a client?

Filet: They are, and we have many clients in common.

IMD: Does having a broker as a shareholder cause any problems in terms of how you are perceived by the market?

Filet: No. They have just supported us with capital, like a venture capital firm. And while we are run completely independently, it can be an advantage to have the backing of a significant shareholder like Newedge, which is very well capitalized. It means that our clients know we are not going to run into any funding issues. It is also a real added value for us to have an investor who knows our market and our clients' needs.

IMD: Given your recent deals with the LSE, you now seem to have become the data partner of choice for the exchange. In light of NYSE's acquisition of Wombat, do you think your relationship with the LSE has the potential to progress further?

Filet: For us, the growth trend is so good at the moment that we are not thinking about anything else with the LSE or others. That does not mean that we have not had proposals.

One interesting thing about the LSE relationship is the process we went through to get this contract. The LSE spent almost two years choosing their partner, so we have run every test that you can think of with the exchange. They really did their due diligence, considered every vendor out there, and progressively whittled down the candidates through a really rigorous selection process. To be validated in that way is something that we are really proud of.

IMD: Looking forward, are you looking to expand into Asia?

Filet: It is on the roadmap, as we have already signed contracts with clients, but the first step will be to provide Asian feeds to our US and European clients. The second step would be to establish a local sales presence and develop a client base in Asia, but that will only happen over time.

IMD: We hear that there are challenges with telecoms in Asia that are difficult to overcome. Is that the case?

Filet: That is the biggest problem we face, and is why we are not there yet. In many markets, the infrastructure is just not there yet, and even some of the markets themselves are not ready for high-frequency trading. But we should be there, up and running in the second quarter of 2010.

IMD: In terms of your client mix, in addition to supporting the LSE, you also provide data to multilateral trading facilities like Turquoise and Baikal. Beyond that, is your primary client focus on the buy side of the industry?

Filet: Unfortunately, most of those relationships are covered by non-disclosure agreements, but you could probably take the top five quantitative hedge funds and they would be our clients.

IMD: Would you say that most of your revenues come from the buy side?

Filet: That tends to evolve. We are a technology company, and we understand the needs of the buy side, but this is also valuable when we design offerings and services for our sell-side clients. That said, we certainly started out with a clear focus on the buy-side, and quickly built up a strong list of buy-side clients that are incredibly demanding.

IMD: Are they demanding both in terms of performance and cost?

Filet: Cost is an issue, but we are well-positioned in the market in that respect, so above all it is about performance. A few microseconds for our clients can make a big difference in terms of revenue, so they understand that the technology to save those extra microseconds comes at a cost. But quality is also a factor. I am always struck by the fact that everyone talks about latency, but the quality of the feed can be overlooked. The way that you manage your reference data, interpret trading session information and ensure that you can provide a standardized feed of low-latency data from multiple markets can all make a big difference to your clients.

IMD: So other vendors normalize feeds, but do not necessarily standardize the information?

Filet: Right. Sometimes information is communicated in a way that is specific to a particular market. Other vendors will just transport that data. We take the time to understand this type of information. Take trading status indicators, for example: we can interpret all of the different flags that individual exchanges use to communicate their trading status, and then deliver that to our clients in our standardized framework. We also do a lot of work on static data to make our clients' lives easier.

IMD: A lot of your product is currently provided as software. Have you considered adopting hardware-accelerated technologies?

Filet: We have worked on it, but we think there are significant drawbacks to the technology. Hardware-based devices are good at crunching numbers, but decoding and standardizing real-time feeds can be such a complex process that hardware processing only applies to a few tasks, such as decoding and filtering datastreams. We have done a lot of work with excellent research centers in France, and continue to do so, but we are still not convinced of the benefits. We prefer to focus on optimizing our software through the use of IPC (inter-process communication) transports, real-time micro-kernel technology or even bypassing operating system layers. We also work closely with the Intel FasterLab to get the best from their latest processors. With the new Intel processor technology that continues to evolve, and with all of the customization that we carry out to optimize our usage of the operating system, customize the I/O stacks, and take advantage of multi-core architectures, we feel we provide a really optimal solution at present, and we are working on new and still-confidential technologies as well.

IMD: Is the flexibility of data delivery another important aspect of your technology?

Filet: Our clients all have different needs, so our middleware platform allows us to design specific solutions for individual clients, and to integrate our feed within environments like RMDS, 29West and Solace Systems. If a client wants data delivered in a customized way, we can configure that in a couple of days for them, which you could never do with a FPGA (field-programmable gate array) solution. There are some key constraints with FPGA. The main problem is that you are limited in terms of the amount of memory, and the complexity of algorithms that can be implemented. At some point, the performance edge over software disappears and some functions-like packet-loss recovery, which usually requires a TCP stack, and real-time reconstruction of Market-by-Order order books-just couldn't be implemented on hardware.

IMD: And with exchanges changing their feeds regularly, does that also require a lot of development effort to stay on top of the changes?

Filet: Some feed handlers require a dozen upgrades each year. There is not a single week that we do not bring out an update of at least one feed handler, and that is part of our added value. It is easy to develop software, but requires massive efforts to maintain it and keep it at the cutting edge.

CEO Confidential

Date of Birth: July 16, 1972

Hometown: Nyons in the Provence region of France. It is the French capital of olive oil

Education: MSc in software engineering, specializing in robotics and artificial vision, and a Masters in Finance from Nice University

Current Home: London, UK

Family: Single

Q. What book are you currently reading?

A. Brain Rules by John J. Medina. It explains how the brain works and extracts 12 rules to improve the way you think in daily life

Q. What was the last movie you watched?

A. For All Mankind by Al Reinert on Blu-ray. It's a film of digitally remastered footage of the Apollo missions in incredibly high quality

Q. Which sports team do you root for?

A. Arsenal!

Q. What did you do for your Christmas vacation?

A. Spent Christmas with my family in France, then motorbiking in the Cambodian jungle

Q. What's your favorite city or place to visit?

A. A tie between Florence, Italy and New York

Q. What newspapers or magazines do you read?

A. Inside Market Data, the Financial Times and Le Figaro

Q. If you could have dinner with any person, real or fictional, dead or alive, who would it be?

A. My future wife

Q. How much sleep do you get each night?

A. Seven hours, although Brain Rules recommends eight