Point72 Ventures

Wall Street Cuts Its Landline

There are over seven billion people in the world, connected like never before through a global communications network. They have access points across the planet through wireless coverage and broadband in their homes and communities. Google and Facebook are putting balloons and drones over remote regions to deliver Internet access to rural locales. Over one billion people carry smartphones and nearly three billion have access to the internet. We connect to each other through our mobile numbers, Skype, SMS, WhatsApp, Messenger, Viber, Snapchat, and hundreds of other methods downloadable in app stores — with such connections being created immediately, as easy as the submission of a “friend” request or the entry of a username. We take for granted that anyone over the age of 35 grew up in homes with a single landline and that the Skytel pager was a revolutionary experience in their lives. Today, more than ever, there is a clear expectation in the consumer space of ubiquitous, instant, and ever-improving communications.

The global equity markets trade over 300 billion shares of stock a day. The foreign exchange market trades over $5.3 trillion in currencies daily. Over $30 billion of corporate bonds change hands per day in the US alone, and the sovereign bond market trades hundreds of billions each trading day as well. Advanced telecommunications have moved a significant portion of this global liquidity into a machine-to-machine paradigm. Yet there are still hundreds of thousands of people working across banks and investment firms that need to pick up the phone and talk to one another in order to trade.

However, in an era defined by smartphones and HTML5 applications, the professionals that control the global money flow predominantly use a single device for their daily voice communication — a trading turret. It’s a giant phone that resembles a switchboard on a trader’s desk — but costs $10,000 — and plugs directly into a series of expensive private lines. Each button on the turret connects a user directly to a single trading counterparty. Unlike the communication technology in the consumer space, the trading turret is not portable, it is not instant (as connections can take days to weeks to establish) and it has improved little in decades. The trading turret looks more or less the same today as it did it in the 1980s. In fact, many of today’s trading turrets are based on technology that is forty years old.

The standard trading turret has changed very little since its introduction in the 1980s.

In spite of the trading turret’s outdated technology and functional limitations, the financial services industry spends an estimated $1 billion-plus per year buying, replacing and supporting these devices. Why? Electronic communications policies for the financial industry are intense and do everything except embrace the technology of our modern communications era. The mantra one so often encounters nowadays in financial services is, “Why mess with something that works — no matter how antiquated?” However, this is no longer an option. Given the increasing demands for better compliance across all communications channels, renewed focus on cost reduction, along with the need for better features and functionalities, it is time for voice communications in the financial services industry to modernize.

We are announcing today our investment in Cloud9 Technologies, the company we believe will transform the way the financial markets communicate via voice. Our team at Point72 Ventures will partner with some of the most prestigious banks and brokers in the world to usher in a new era for front, middle, and back-office trading communications, analytics, and compliance.

Cloud9 provides a cloud-based voice communications platform with more functionality than the incumbent turrets at a fraction of the cost. It provides operational agility for today’s mobile workforce, dynamic disaster recovery, API access to other analytics and communications applications, true BYOD potential, interoperability with legacy trading turrets and an array of other technical and operational benefits. In short, the trader workflow is about to undergo a dramatic improvement. The founding team led by CEO Jerry Starr helped develop the industry’s original turret systems, and are now back to lead the industry into the digital and mobile era.

We at Point72 Ventures and our parent Point72 Asset Management are excited to play our role in helping the industry, our peers and counterparties finally realize the benefits of the modern world of communications.

This is not an advertisement nor an offer to sell nor a solicitation of an offer to invest in any entity or other investment vehicle.  The information herein is not intended to be used as a guide to investing or as a source of any specific investment recommendation, and it makes no implied or express recommendation concerning the suitability of an investment for any particular investor.  The opinions, projections and other forward-looking statements are based on assumptions that the authors’ believe to be reasonable but are subject to a wide range of risks and uncertainties, and, therefore, actual outcomes and future events may differ materially from those expressed or implied by such statements.  Point72 Private Investments, LLC or an affiliate may seek to invest in one or more of the companies discussed herein.