Last month Perseus, the world’s leading managed services provider of high-speed connectivity across the trade lifecycle, announced a USD20.5 million investment by Goldman Sachs. The capital injection is a sign of the growing importance of technology specialists as global markets seek to use faster, more secure managed services.
“We were very grateful of Goldman Sachs’s investment backing. We’ve got 28 new markets to roll out to. We’ve already done so in three of them this year: Santiago, Johannesburg and Istanbul. The next tranche of growth is going to come from Shanghai, Taiwan, Mumbai, Sydney to name but a few,” comments Dr Jock Percy (pictured), CEO of Perseus.
Currently, Perseus provides fully managed services and connectivity to more than 300 exchanges and markets in 18 countries across the globe. Since Percy established Perseus in 2009, it has enjoyed 131 per cent compound annual growth.
Perseus provides everything required for trading, up to the application layer. This includes base layer connectivity, proximity co-locations, high-speed market data and so on.
“We support everything up to the application layer meaning we don’t compete with our customers. We support all the big hedge fund and trading platforms and cover all the major world markets; New York, Chicago, Galway in Ireland, London, Frankfurt, Sao Paulo, Tokyo, Hong Kong. Global coverage is part of our value proposition,” says Percy.
Since its formation in 2009, Perseus has carved out a market leading position in the ultra low latency, high-speed part of the market. It is, says Percy, an integral part of the firm’s DNA.
That said, in reality the broadest part of its customer base is not looking to find the last percentile of speed.
“To put it into context, the full managed service that we provide, called LiquidPath®, includes connectivity, co-locations in proximity to exchanges, PrecisionSync™ which time stamps the trade, full network monitoring and visibility, market data: all of that shrink wrapped is likely to be of significant interest to a hedge fund that doesn’t want to build it and do it all itself,” explains Percy.
It used to be an 80:20 split between managers doing it themselves and those picking partners like Perseus. That has now gone 40:60 the other way according to Percy, creating beneficial tailwinds.
“As DIY is so expensive, and competitive, 60 per cent of global market makers recognise that there are significant portions of their infrastructure costs that they can reduce by working with a partner like Perseus to manage the infrastructure on their behalf. They still rely heavily in terms of using proprietary technology at the application level for trading strategies, but there is a growing recognition that having the infrastructure service layer managed by a third party is a smarter move,” says Percy.
Given the capital intensity of the business, Perseus was keen to find the right partner to provide capital to accelerate forward and continue to optimise the network. Indeed, when speaking about the R&D challenge, Percy uses a Formula 1 analogy to convey the point.
“It’s a sport where teams are constantly looking for ways to optimise performance. We spend an inordinate amount of time on R&D,” states Percy.
It is for that very reason that banks, exchanges, HFTs and large buy-side institutions are turning to Perseus. Previously, an institution would build a full network infrastructure to service their applications. It was, in many ways, a one-off – albeit highly complex – exercise.
The difference is that Perseus never stops enhancing the infrastructure.
“When you overlay a large-scale trading firm, or market maker, you realise very quickly that Perseus connects to all the same locations around the world, and that the network and infrastructure, by and large, look the same, so why bother doing it internally?
“It’s a bit like United Airlines going off and building their own aircraft – they are in the business of selling flights. That’s all they need to focus on,” explains Percy.
So what does the future hold for the rest of 2015?
According to Percy it will be getting the additional 25 markets rolled out as quickly as possible to provide customers with a truly global managed service. What excites Percy is that when that end-point of market coverage is reached, people will have total mobility over what and where they trade.
For example, if a macroeconomic development takes place in South Africa and presents a good trading opportunity, customers will be able to literally drop their application into the Perseus environment and get to work. If they want something more proprietary, they can opt to stack a server in the Johannesburg co-location. Or Mumbai. Or Lima. Or Shanghai.
“Sometimes new market opportunities are like Supernovae – they emerge, they explode in a flash, and then they burn out. One we complete our global LiquidPath deployment customers will be able to move from market to market in a flash,” concludes Percy.
