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Powering $200 billion in trade every day
Posted By Sharon Kanon On August 9, 2009 @ 4:34 am In | No Comments
“Money makes the world go round,” they say. Well, since the explosive growth of electronic foreign exchange trading, more money is going around than ever before. And the new trading paradigm has catapulted an Israeli company into a leading place in the global financial industry.
Call it vision or call it perfect timing, Traiana was poised to launch its sophisticated foreign exchange-trade processing service just in time to serve the urgent needs of the over-the-counter financial markets.
“Manual systems are error-prone, inefficient, costly and risky. They can’t handle the massive amounts traded each day,” Rafi Vasserman vice president and head of R&D at Traiana, tells ISRAEL21c.
Traiana was voted the “Best Vendor for Post-Trade Services Specializing in the Wholesale FX (Foreign Exchange) Markets” by FX Week, in 2008 and again this year in 2009.
The Israeli start-up is part of the British-based ICAP group since it was purchased for $247 million a year and a half ago. Traiana’s automated post-trade system, Traiana Harmony – now the market standard – facilitates the daily transfer of more than $200 billion in currency trading transactions from one financial institution to another.
No trades get lost in the shuffle
The ability of Traiana’s Harmony Network to process trades in real time, at any moment, is a big boon to investors who risk the loss of thousands or millions of dollars if trades are lost in manual processes. With Traiana Harmony, the company asserts that deal tickets do not get lost in the shuffle.
“In the past, when there was a relatively small amount of trading, trades could be handled manually in the back office of most banks,” says Vasserman, speaking from his Tel Aviv office. “Since the onset of electronic trading and algorithmic trading three or four years ago, the volume of foreign exchange trades has spiked.”
This led to a problem: Credit has to be scrutinized before each deal can be approved.
“The trading model used by these types of traders is similar to use of a Visa card that extends credit,” Vasserman explains. “Each client has limits and these have to be checked. The way it works is that the hedge fund, or broker, goes to a big bank to get credit; with the credit, the fund can enter into a trade with another financial institution to get the best price and service.
“Traiana’s Harmony not only checks the limits automatically, it also can do so in any major global currency. The advantage it gives the hedge fund and prime broker is that they can use their credit to sell in one place, and buy in another, within seconds,” he adds.
Traiana’s Harmony platform does not require “new plumbing,” to access. It has a holy grail, a “universal adapter” system that can read and generate messages in all the common formats as well as custom ones that are unique to each firm.
Connecting in a single hub
The company’s name was derived from a Roman aqueduct, Traianus, which carried the clear, healthy springs of the Tiber River to the industrial part of town.
Targeting large banks and financial institutions, Traiana connects all market participants together in a network model, not just one bank with another.
The technology serves as a single hub that centralizes all post-trade interactions. This provides a significant advantage. It is able to aggregate (consolidate or bulk) trades in different categories, such as currencies, buys and sells, thus saving costs and optimizing the chance of getting a better deal.
Traiana was founded in 2000, by CEO Gil Mandelzis who saw the need for a “post-trade” system when he was advising Deutsche Bank. And although Traiana opened for business during a financial crisis, when it was hard to get VC funding, it attracted several top funds – Sequoia, Pitango, Gemini and Evergreen.
The company had an office in California for a short time before moving closer to the action in New York, in 2005.
The current economic crisis has not caused a blip in Traiana’s growth. Since 2008, when the company was acquired by ICAP, revenues have grown significantly. This year, it is also expected to show substantial growth.
Moving into new turf
Traiana’s business model is driven by the growth of the number of trades. Each trade triggers post-trade events, and the customer, typically a large bank, is charged for each event.
The company has partnered with the major electronic trading players, including Bloomberg, Currenex, Flex-Trade, EBS Aegisoft and many others.
A joint venture signed in April with CLS, an organization established by the big banks to facilitate settlement between banks (an area even more risky than credit) opens up another venue. Later this year, Traiana will launch an aggregation platform between banks that further lowers the costs of processing trades for the industry.
Vasserman reveals that his 100-man R&D team (two-thirds of the company is in Israel) is moving into new turf – the retail market.
Big in Japan and growing in the US and Europe, in this market individuals do their own trading in on-line portals. Trades are usually much smaller than the institutional markets, making low-cost, efficient processes even more important, he says.
Another feather in Israel’s cap, ICAP decided to open an R&D center in Israel for its core electronic brokerage business, after a competitive six-month pilot in several countries.
Vasserman, general manager of the overall investment effort in Israel for both ICAP and Traiana, is in the midst of recruiting 80 people. We are excited about the new ICAP-Traiana initiative in Israel. It will give us a broader opportunity to contribute to the world financial markets,” beams Vasserman.
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