Euclid Opportunities has been created to fund and nurture financial technology start-ups, specifically those creating new tools and platforms in the post-trade space. The hope is, according to managing director Steve Gibson, that this growing portfolio of innovative companies will play a crucial part in the future financial technology environment.

Buy-side and sell-side technologists are curious about Euclid Opportunities. Majority-owned by ICAP, the inter-dealer broker, the Euclid team pick the best ideas they can find among financial technology start-ups for the middle and back office, then help them to blossom.

Managing director Steve Gibson says that his role is to join the dots between buy-side, sell-side and infrastructure firms, and then to identify what will best meet the needs of the market. “We build and assess interesting opportunities” he says. “We review a lot of companies, demos and business plans, and spend time working with our own companies.”

Building for the future

There are a number of post-trade firms within ICAP’s portfolio. The intention of Euclid is to support the early-stage firms that may grow up to complement ICAP’s existing post-trade assets, either directly or as new, standalone assets. Euclid takes potential financial technology leaders through the start-up stage and turns them into viable financial technology firms, with a focus on post-trade, middle and back office, all areas that can benefit from more efficient processing.

“There are technology and business trends that point to an increasing number of post-trade service providers for the sell-side and buy-side,” he says. “Our project is to provide funding in some but not all cases and, over the first two or three years... to help them build scalable, valuable and efficient firms.”

He explains that since launching in March 2011, Euclid Opportunities has reviewed about 400 firms and, at present, it is working with six of those. Sometimes it will work in a joint venture with them, sometimes it will provide them with investment and, in one case, it is building a joint product. OpenGamma, Duco and Enso Financial are all in the Euclid camp.

OpenGamma provides open-source risk analytics. That allows all participants in the market to use the same version of code as one another without having to develop a joint standard, or bicker over whose proprietary system is better. “In an increasingly connected world we all need to be using the same analytics to ensure that the numbers tie up,” says Mr Gibson.

Duco provides an on-demand service that helps buy-side and sell-side firms reconcile formats of data and transform it into something more useful, that can be easily reconciled and matched and integrated. This is an increasingly valuable service.

Enso Financial provides end-of-day analytics to hedge funds. It automates and aggregates book and records data across different prime-broker relationships. It is developing a service that would allow the head of operations access to interrogate the entire gamut of books, relationships and records, then try to optimise measures such as funding ratios and counterparty risk measures. “Centralised reporting and analytics, if done well, makes that middle office function more efficient,” says Mr Gibson.

Connecting the dots

By exploiting the scale and agility that cloud computing and open-source can offer, these firms can leap ahead of incumbent technology providers, putting ICAP in a very advantageous position as a service provider. Although the Euclid project is only a few years old, the traction it has is compelling. Open Gamma, as an example, is reported to get about 14,000 downloads every time a new release is put up.

“With the open-source model you have an increasing community of people who are building product on your code,” Mr Gibson explains. “You may not see much of this but it will allow people to start building product on your platform. It is allowing firms to build products that solve problems that they understand. That is just a much more efficient way of building product than the old model, where you fired off a request-for-purchase and a year later a product may finally have been delivered, that matches some of the requirements that you had, but not other requirements you now have.”

ICAP owns Euclid because it will help it to provide new services in the post-trade space, an area it has been expanding in. The start-ups can address what ICAP's clients are asking for, solutions to problems often driven by regulatory reform. These reforms have deadlines, they impact across the market and they can bring grief to any firm failing to address them.

“People are looking for scalable, efficient ways of solving problems and it is very difficult for some of the established technology vendors to be agile enough and to create the new operating models and technology models quickly enough to be able to meet customers’ needs,” says Mr Gibson.

“We are building proof and validation here. Lots of prototypes, trials and lab situations. We keep as close to ICAP's clients as we can, to understand exactly what they are looking for. When we see something interesting we connect the dots and look for some form of proof that these problems can be solved in a new way rather than a traditional way.”

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