The key to a successful business plan often hinges on who gets there first with a market-revitalizing product. Being first may not guarantee instant success, but it certainly makes those that follow behind play catch-up.
Marketcetera’s Automated Trading Platform may prove to be just that key for Graham Miller, CEO and cofounder. Early last month, his company brought to market an open source trading platform for traders, hedge fund managers and brokers and dealers.
The idea for this trading platform grew from his dissatisfaction with available products he used during his 10 years of managing trading platforms and strategies for Wall Street hedge funds. Stanford University computer scientists Miller and CTO Toli Kuznets founded Marketcetera in 2006. Their unhappiness with the long implementation cycles and costly maintenance that proprietary automated trading software required led the two on a quest for a lighter-weight, more flexible replacement platform.
At a time when many in the finance sector were skeptical of open source, Marketcetera took a gamble that its Automated Trading Platform would lay the foundation for continued investments from what could be a run on a new approach.
“He has a wide-open field there. In the conventional wisdom, trading is falling off when in fact it is going through the roof. Trading companies are under growing pressure to reduce cost and lower transaction costs and still get stuff out to market pretty quickly. Open source is a terrific way for them to do this because they don’t have to bring in legions of people to do new coding when you want to offer a new product,” Ellen Carney, senior analyst of Technology Industry Strategy for Forrester Research, told the E-Commerce Times.
What It Does
It took Miller and Kuznets two years to develop what became a standards-based modular trading platform with open application programming interfaces (APIs) and support for multiple development languages. The software enables users to apply complex event processing with Esper (an event stream intelligence processor component) implemented as the Complex Event Processing (CEP) engine.
MarketCetera’s platform consists of three components. Photon is a visual graphic user interface (GUI) that controls and monitors trading activities. Marketcetera Trading Server (MTS) enables order routing and database management. Customized services include pricing logic and integration tools.
The product is available for free download here.
The financial sector can expect to see more open source vendors arriving, according to Forrester’s Carney. The marketplace is starting to get enough buzz about open source.
“Even moving to Windows was a radical change for this particular environment. It is sort of the next logical step. I think you will see other companies start to follow. We named Marketcetera as a startup to watch in our 2009 market report. A lot financial institutions are looking at that report. I think he’s in a good place at a good time when you consider the pressures on the marketplace,” said Carney.
Open source is starting to overcome the hold established by proprietary products, she suggested. At many of these firms, even the IT department had Wall Street promises, and IT workers want to protect that legacy.
“An open source platform is going to have implications on your Wall Street bonus,” said Carney.
Company Close Up
“The Marketcetera Automated Trading Platform has the only open source automated trading platform available today. That means we have an application that can provide the basis for a modern trading applications for hedge funds. Any organization that has a professional trading arm to it can use our product to build out trading applications, specifically automated trading applications,” CEO Graham Miller told the E-Commerce Times.
As an open source offering, Marketcetera’s platform provides flexibility and control of the product while providing a solution that lacks any vendor lock-in with compelling total cost of ownership, according to Miller.
LinuxInsider recently spoke with Miller and Kuznets to discuss the trading platform concept.
LinuxInsider: Why isn’t there more of a stampede of open source vendors coming to the financial market?
We think it’s accelerating. The recent market shake-ups have caused acceleration in our market and our sales pipeline. We’ll see how it plays out in 2009.
LIN: What got you interested in this particular slice of the open source software market?
My cofounder (CTO Kuznets) and I were originally Stanford computer science guys, so we cut our teeth in Silicon Valley at several venture-backed start-ups and eventually moved over to Wall Street. Initially I moved over to build an automated trading system for equity options and kind of got hooked on the excitement of that industry. Over the course of six years or so, I built out a number of these trading systems and realized that there was a need for a platform to help build out these applications and that the open source approach really maximizes the flexibility that an organization can have with the product while minimizing time to market and maintaining the fast pace that is typical with the industry.
LIN: How is your Automated Trading Platform different from previous projects that you’ve done?
I think the difference in what we are building today is a platform product, where previously what we were building were automated trading products. The commonalities and the differences between those was a key part in understanding what the Marketcetera product needed to do. So the initial platforms were designed to solve a particular problem. We realized that every time you would write a new strategy you had to start from scratch. This is why we decided to start Marketcetera to make it as a platform to enable people to write all these strategies faster. So we are a lot more standards-based with a lot of emphasis on making the platform more flexible and easier to extend and easier get going so people could write their strategies a lot faster.
LIN: What practical steps were necessary to get this platform idea moving forward?
We built out the kernel of the platform and approached a couple of angel investors who have experience on Wall Street and understand the needs of trading organizations. We went to them with a fairly basic business plan, which was to build out this platform product. We raised a small seed round based on that kernel of the product.
LIN: How much effort did it take to go from concept to a real open source company?
Over the course of the next year and a half or so, Toli and I worked on the open source product, and did a small amount of consulting and other work to pay the bills a little bit. But then at some point we realized in order to build this out to an organization that we wanted, we needed to bring in some heavy-hitter investors to raise a larger sum of money and really start to build our team and the product and get all the things like the service organization and the support that marketing entails and all those things that are important.
LIN: How widespread has the use of pre-release versions of your platform been?
We released the product fairly early on and have been supporting our customers using the platform for a little over one year. Organizations have been using the platform. Version 1.0 is really our first generally available system that we feel good about promoting as a full version of the platform.
LIN: What were some of the major challenges you and Kuznets faced in getting to the 1.0 release?
One of the major ones is we faced was a fair number of naysayers in the world of finance that kept telling us that financial institutions are secretive and that they’re not interested in open source and sharing and they are worried about this and worried about that. We had a fairly uphill battle over this with a number of people, including potential investors, potential customers, potential partners and journalists even. Going through some of the Microsoft doubt arguments against open source, there was a lot of education we had to do along the way.
LIN: Besides the naysayers, what other hurdles got in your way?
The core of any company is its employees and its people, so we spent a lot of time and effort making sure that we get the right people and that we’re evaluating them appropriately before we bring them on board, and then making sure that they stay key after coming on board. This has been an ongoing challenge.
LIN: Describe the size of your company at this point.
We are still fairly small with less than 50 people. We have a sizable engineering department. We have support and professional services in place. We have a marketing team that is doing a phenomenal job on a shoestring budget. We have all the pieces in place right now to build out a successful commercial open source business.