Author: Max Bowie
Source: Inside Market Data
Canadian business development advisory firm Collaborative Financial Services Inc. (CFSI) has signed deals to represent two Toronto-based companies – startup market structure and transaction cost analysis provider Market Data Authority and managed IT services provider Quartet Service – to help both expand their presence and breadth of service among financial services clients in the region.
Chris Sparrow, a former equities and derivatives trader at RBC Capital Markets, ITG and TD Securities, who has also served as a consultant to the Investment Industry Regulatory Organization of Canada, set up Market Data Authority (MDA) a year ago to provide market participants with analysis of market activity, liquidity provision and routing strategies.
MDA provides a cloud-based database of tick data on Canadian markets that can generate static reports and custom analytics via PDF files or via a web-based front-end interface. As well as “more traditional” types of volume-based analytics, MDA also offers its own custom analytics, which include the ability to identify which side of a trade is the “active party,” based on public data, which can help brokers, buy-side firms, regulators and trading venues understand which venues brokers route to and execute on; and the ability to identify “spray waves”─when a broker posts liquidity on multiple venues simultaneously─which might be useful for sell-side firms to perform competitive analysis, and for buy-side firms to understand who is providing liquidity.
“Ultimately, my interest lies in trying to analyze the quality of market data and its impact on execution performance,” Sparrow says. “Basically, I created a company that I wish had existed when I was in some of my previous roles.”
But to bring the company to market and generate sales, Sparrow enlisted CFSI based on its founders’ expertise in the Canadian markets, and on knowing CFSI co-founder and chief information officer Dave Mulder for around 15 years. “My core competency is on product and analysis… and I think CFSI can add a ton of value… as they build out their suite of partners,” he says.
In fact, CFSI has already helped MDA establish a group of pilot evaluations at sell-side and buy-side firms and some academic institutions, says CFSI co-founder and managing partner Jim Davies.
However, Quartet Service─which was founded in 1998─already has an existing presence for its services among financial firms, but is hoping that CFSI will help it grow the number of financial clients and broaden the range of services it provides to them.
“Quartet has between 15 and 20 financial clients using us for anything from helpdesk services and on-site support to using our infrastructure, data network and our large IBM-based cloud environment,” says Quartet president Robert Bracey. “How clients use our infrastructure varies: some run live servers on our gear; some use it to run backup servers; and a lot just use it for disaster recovery… and for running tests and disaster simulations. So a lot of our clients are using a hybrid system, where they have live servers on site, and backup servers on our hardware.”
Bracey says the area where CFSI will provide the greatest benefit for Quartet is around non-recurring consulting services. “Some of the clients don’t have the critical mass to do things they need to do from a competitive point of view, or are obliged to do from a regulatory standpoint… [so] found we were getting dragged into the nuts and bolts of the financial world, and we realized that some specialist expertise would be good for our growth,” he says.
In addition, CFSI will offer Quartet’s services to other potential clients that may primarily be looking for a different service but could also benefit from general office automation, PC and server management, infrastructure monitoring and helpdesk services. “Customers are starting to understand our approach and what we’re trying to accomplish. Now when we go to see a firm, they ask ‘What have you got today that’s interesting?'” Mulder says.
However, the deal will also help CFSI build out and operate its own planned solutions from its suite of partner services. “These will include technology monitoring and management solutions, so we need people to help us support those,” Mulder adds.
CFSI already acts as Canadian distributor for UK-based data technology vendor MDX Technology and data vendor Activ Financial. In fact, Activ’s data also plays a key role in both MDA and Quartet’s plans: MDA uses market data from Activ to populate its database, under a deal arranged by CFSI co-founder and sales and marketing head Will Kennedy in his prior role as executive vice president of business development at Activ. In addition, firms using Quartet to provide hosted IT services TMX Group‘s co-location center and the Equinix Toronto proximity hosting facility can also access broader datasets from Activ in those locations.
“This kind of cross-pollination and leveraging each other’s services both helps us save money, and also helps our clients save money,” Davies says.
Though not involved in this example, MDA is also open to working with other CFSI clients to expand its reach and potential audience. “As a startup, I’m trying to figure out what my potential market is… so integrating with other systems is a natural move,” Sparrow says.