In 2017, FIA welcomed 19 young companies from around the world to its third annual fintech showcase, the Innovators Pavilion, the event that takes place within FIA’s Futures and Options Expo in Chicago.
The Innovators Pavilion provides a unique opportunity for a select group of fintech startups to showcase their solutions for the derivatives industry and pitch their services directly to Expo attendees, including senior executives and decision-makers from exchanges, clearinghouses, banks, brokers and trading firms.
Since their participation, many of these 19 startups have achieved notable milestones in their development, including additional funding rounds, expanded services, high-profile customer wins, and outright acquisitions.
As FIA opens the application process for the 2022 Innovators Pavilion, MarketVoice highlights 10 dynamic firms from the 2017 FIA Innovators Pavilion and the key milestones in their growth during the intervening years.
Amenity Analytics: Cutting through the noise
Much like the conversation on a first date, understanding how well an investor call went is often about reading between the lines. But for firms with interests in hundreds of companies around the world, analyzing the content of every call is a hugely onerous task.
This is where Amenity Analytics can help. The New York-headquartered company helps customers draw actionable insights from text on a massive scale – for example, financial firms can use its platform to sift through conference call transcripts and SEC filings to identify key players, events, relationships, and sentiment of what was said.
Combining recent advances in machine learning with proprietary natural language processing technology, Amenity’s cloud-based platform transforms structured and unstructured data from several primary inputs including news, regulatory filings, earnings transcripts, social media activity and research reports into targeted information in formats that are intuitive to use.
The software, its founders say, can even pick up on signs of potential deception that CIA and FBI interrogators look for – including stalling and the use of qualifiers.
The company was founded in 2015 by Nathaniel Storch, a former Wall Street analyst and portfolio manager; Ronen Feldman, a professor at Hebrew University in Israel and an expert in the field of text mining; and Hedva Feldman, an entrepreneur in the Israeli high-tech industry.
Since its inception, Amenity has also expanded into the environmental, social and governance space, where a focus on these issues and the number of disconnected stories has grown exponentially. The company’s ESG products aim to help firms “cut through the noise” and include a platform for ESG analysis and alpha-generating signals to support trading strategies.
Customers of its services include several large financial institutions such as Barclays, Citi, Evercore, Moody’s and Nasdaq, as well as news organizations and consultancies. In 2019, Amenity raised $18 million in series B financing led by Starr Companies, an insurance group, and including Allstate, Intel Capital and State of Mind Ventures.
FNA: Preparing the world for the next crisis
The mission of London-based analytics and simulation company FNA (Financial Network Analytics) is to make the financial system safer and more efficient – and its growing portfolio of clients includes some of the world’s largest central banks, financial authorities, infrastructures and commercial banks.
Founded in 2013 by Kimmo Soramäki, an expert on network theory who previously worked as an economist at the Bank of Finland and the New York Federal Reserve, FNA provides software that allows institutions to map and monitor complex financial networks and simulate operational and financial risks.
As history shows, a lack of clarity over the interconnectivity of banks and financial institutions was part of the problem in the 2008 financial crisis. FNA’s platform helps users to understand key connections and correlations within their networks and identifies weak spots that otherwise might go unnoticed.
Its simulation tools predict the impact of stress events within systems and networks, while its proprietary algorithms configure systems and networks for optimal performance.
FNA says it works with global regulators to better manage systemic risk, exchanges to understand risk concentrations and simulate operational risks, and payments platforms and banks to optimize liquidity and manage financial crime risks.
In 2017, the year it entered the Innovators Pavilion, FNA signed up its first enterprise subscription clients, including CME Group and Payments Canada. Since then, the company has closed a $5.5 million Series A investment round led by IQ Capital, secured a strategic funding round from G+D Ventures, and signed up a range of partners and clients.
Earlier this year, it announced it was working with the BIS Innovation Hub, the Monetary Authority of Singapore and the Bank of England on Project Ellipse – a single platform for authorities to access integrated sources of data to help support and inform their supervisory assessments.
Halo Investing: Bringing complex products to a new generation of investors
Founded in 2015, Chicago-based Halo Investing is a financial technology platform that helps distribute sophisticated investment products including structured notes to the global community of financial advisors. Halo's goal is to empower advisors with an array of risk-management tools and lower the barrier to entry to these products thanks to more accessible investment minimums and lower cost structures.
Halo's platform connects the advisors to issuers looking to access more potential customers. The result is a broader reach as well as a more efficient process where trades can be booked in minutes instead of days.
As the retail investing phenomenon has gathered momentum since 2017, Halo has doubled down on its efforts to bring complex products to a new generation of potential investors. It has moved beyond cost-effective structured notes to annuities and defined-outcome ETFs offered to average investors through its network of roughly 6,500 Registered Investment Advisors. Additionally, Halo has invested in risk assessment technology that will help RIAs perform portfolio simulations and scenario analyses to better serve their clients.
Recent growth is likely to continue, too, in the wake of a $100 million Series C funding round completed in October 2021 led by Owl Capital, a venture capital firm based in California, and Abu Dhabi Catalyst Partners, a venture capital fund backed by the Abu Dhabi government.
Quantiacs: The crowd-sourced quant platform
In 2017, Quantiacs won a place at the FIA Innovator's Pavilion thanks to its unique "crowd-sourced" quant platform that allowed individual investors to build and share their own trading algorithms for futures contracts. Five years on, the company is thriving as it has built on past success and continues to attract quants looking to build even better algos than the ones before.
The process is, on the surface, a simple contest: Quantiacs allocates $2 million to a contest with a specific goal. For instance, right now there's a competition to develop the best performing long-short algo for the Nasdaq-100. After approval, the crowdsourced algos are deployed and then tracked during a live contest period to determine the winner. In the case of the Nasdaq algo, that period is 1 October 2022 through 31 January 2023.
The winner gets a $1 million award, and the rest of the prize money is distributed to six other top algorithm builders. On top of that, those who built the algorithms have the potential to earn 10% of the profits generated by those algorithms going forward.
Quantiacs is unique in its approach to tap into the growing retail investor community in global derivatives markets. The company has hosted algorithmic trading competitions since 2014 and is currently hosting its 18th such contest. The founders believe enough in the process that they have their own money invested in the platform, and transparently publish performance of their leading algorithms. In an age when derivatives markets are seeing increased retail participation, this unique approach could continue to connect.
Theorem Technologies: A complete platform for managing post-trade operations
Theorem Technologies, a Chicago-based company launched in October 2017, offers a suite of software-as-a-service solutions to streamline and automate several key middle-office and back-office processes, as well as generate actionable insights through its data management tools.
The software was originally built by Thales Trading Solutions, an introducing broker set up by several former Newedge executives, for internal use with its clients such as asset managers, hedge funds and trading firms. The software turned out to be so popular that Thales spun off the business unit into a separate company.
Theorem’s SaaS solutions span trade matching, allocations, reporting, risk management, notifications and data management in an online portal that requires no local install or technician to get started. Theorem says its mission is to “make world-class technologies more accessible”.
Since appearing in the Innovators Pavilion, Theorem has expanded to serve sell-side firms, including futures commission merchants, in addition to buy-side firms, and has leveraged its expertise by launching an advisory service on operational issues as well as "operations as a service" (OaaS).
Theorem also has signed up clients needing help in addressing new regulations, including MiFID II requirements and the US Securities and Exchange Commission's rule 18f-4, which requires funds to report their use of derivatives and came into effect in August of this year.
Meanwhile, its core business continues to grow with the company matching more than 3 billion trades and positions since launch and serving users in six continents.
TransFICC: Tackling fragmentation – a single API for fixed income markets
London-based TransFICC aims to resolve the issue of market fragmentation by providing a single point of access to more than 200 venues in the fixed income and derivatives markets. Its technology is designed to translate different API standards to a common format and uses simple binary encoding and high-performance messaging to ensure fast processing of market data and order messages.
For banks and asset managers in these markets, connecting to the TransFICC API costs much less than connecting to all those venues separately and keeping up with a stream of updates to the interface. It also saves thousands of hours of coding and testing time. According to TransFICC co-founder Steve Toland, many firms connect to a core of about 30 e-trading venues, but in some instances, large trading firms need to connect to, and manage connectivity with, around 70 venues.
TransFICC says its fast, secure and scalable technology allows institutions to keep pace with venues that can update their prices more than 5,000 times per second when markets are volatile. For regulation such as MiFID II, it offers a normalised price/order timestamp to the microsecond level according to when orders arrive at a bank or asset manager, providing an audit trail for best execution.
In April 2020, the company closed a Series A investment round for $7.8 million with AlbionVC, Citi, HSBC, Illuminate Financial, ING Ventures and the early-stage investor unit of Commerzbank. In March 2022, it secured a Series A extension for $17 million with all these shareholders.
The company says that the new investment will expand TransFICC’s engineering teams and support additional venue connectivity and automated workflows in US rates and credit markets. Additionally, new products will be developed, including a complete e-trading system, incorporating a trader desktop interface.
Since showcasing its offering at the Innovators Pavilion, TransFICC has signed up several clients including eight investment banks and two exchange groups. In February, it unveiled a new initiative to develop a consolidated tape for fixed income and said it had developed a production ready pilot for banks, asset managers and regulators to test.
Several of the 2017 Innovators were acquired by other companies looking to capitalize on their unique technology and expertise. They include:
- Tellus Labs: The winner of the 2017 competition, satellite imagery startup Tellus was acquired in 2018 by Indigo Agriculture, an agriculture technology company backed by venture capital. Indigo is focused on providing farmers with insights into everything from local soil quality to projected planting intentions for a given crop as well as registry-issued agricultural carbon credits.
- Prattle: The natural language processing platform built by Prattle helped quantify market-moving commentary to better inform investors. Institutional investment network Liquidnet acquired Prattle in 2019 to bolster its sentiment analysis for clients.
- Predata: Predata developed an innovative application of artificial intelligence to analyze social media for insights on economic and geopolitical trends. Predata was acquired by global information services company FiscalNote in 2021.
- Quantile: In 2021, the London Stock Exchange Group acquired Quantile for roughly $360 million to expand its range of post-trade risk management solutions. Quantile offers portfolio, margin and capital optimisation services for banks, hedge funds and financial institutions involved in derivatives trading.
At the 2017 Innovator’s Pavilion, a panel of judges selected Tellus Labs as the overall winner.
Here is the full list of 2017 innovators:
- Amenity Analytics
- BCause LLC
- ForwardLane Inc.
- Halo Investing
- Peak Soil Indexes
- Prosparency LLC
- Quantile Technologies Limited
- Theorem Technologies LLC
- Virtual Cove, Inc.
This year’s Expo and Innovators Pavilion will take place 14-15 November in Chicago at the Sheraton Grand Chicago Riverwalk.