In today’s fast-changing technological environment, IT infrastructure is becoming increasingly complex, making it imperative to evolve and innovate to keep pace.
In response, players within the trading community are implementing a range of new strategies to stay ahead of the curve.
QuantHouse, a group within S&P Global Market Intelligence, is committed to nurturing creative alliances within our ecosystem to help foster ideas that can further enhance our QuantFEED and QuantLINK product capabilities. In keeping with this vision, we took the opportunity to interview Eric Neo, CEO & Founder of Neo & Partners Global (NPG) who coined the term ‘Trading-Atrium’, to discuss his views about the trading marketplace, the impetus behind his own innovative venture and how diverse technology providers can come together to add value to the overall landscape. For instance, NPG clients can leverage QuantFEED market data solutions among a wide selection of capabilities available through the Trading-Atrium.
Eric, what experiences gave you the idea for NPG?
Over the years, I have held a number of senior positions with global, independent software vendors (ISVs), and I have also worked with a U.K.-based financial derivatives dealer and the largest stockbroker in Singapore. This provided numerous occasions to interact with various parties within the trading arena. I realized these organizations—exchanges, sell-side firms and technology firms —operate on a silo basis to some extent, which creates opportunities for collaboration.
· Understand where trading opportunities exist within Asia Pacific, given its massive fragmentation.
· Gain DMA (direct market access) to exchange gateways and to independent software vendors.
· Know which counterparties to work with when an existing clearing broker is unable to offer regional coverage.
So, the idea of the ‘Trading-Atrium’ for NPG came about. It enables trading firms to easily understand the landscape opportunities, and gain trading access into Asia Pacific or establish their presence in Singapore without having to spend a huge amount of time or the costs associated with initial set-up.
How did the concept of the Trading-Atrium come about?
In Europe and the U.S., the term ‘trading arcade’ is commonly used to describe an electronic trading facility, which is typically operated by a sell-side firm. A trading arcade isn’t a neutral environment as the sell-side firm needs to protect its business, so a buy-side firm may be restricted from trading multiple asset classes or diversifying credit risk by using another sell- side option.
I chose to create the ‘Trading-Atrium’, which is an open space surrounded by electronic trading service elements, including elements of the ecosystem, such as access to exchanges, trading applications, technology infrastructures, sell-side capabilities and even professional services to form a separate corporation in Singapore. These partnerships enable the sum of the parts to be greater than the whole.
What are some of the challenges you see in Asia Pacific?
One has to do with the technology spend. If we look at a successful proprietary trading firm from a Westerner’s perspective, I believe the capital investment allocation for technologies would be substantial. Why? Because technology provides the competitive edge on top of the trading strategies. In Asia, it’s largely the opposite. As a result, technology becomes a stumbling block that prevents the trading strategy from reaching its full potential. In an electronic trading environment, you need to have a good marriage between the two. It’s mission critical.
The other challenge has to do with the fact that we tend to be a bit too conservative in Asia Pacific, so we don’t actively explore new products and markets that may present great opportunities. For example, if I share an idea with someone in Asia Pacific to trade on the Mexican exchange, the response will likely be, “Why go so far?”. If I share the same idea with a Westerner, they’ll likely say they never thought about that, and I should tell them more.
What makes a good third-party partner? How do you critique what’s out there and what’s going to be good for you?
Let’s start with my company name—Neo & Partners Global. I chose this because every third party I engage with is considered to be a partner to me. We come together to create something that’s better than what each of us could do on our own. For example, NPG might ask a partner to share their technology roadmap with us so we can provide input on how it aligns with where we feel the local and regional industry is heading. In turn, this partner may introduce us to firms looking for local market expertise to move into Asia.
With S&P Global Market Intelligence, we are able to combine our local expertise with global expertise. That can be a powerful combination to enhance both of our activities. So, good partners are firms that can offer complementary capabilities and have an entrepreneurial spirit that makes them want to investigate possible ways to work together—it’s not a purely transactional relationship. With QuantHouse, we are able to combine their global presence with our local expertise, which can be a powerful combination to enhance each firm’s respective activities. For example, QuantHouse has developed a footprint among automated trading participants globally, with connectivity to over 120 market data feeds. Some of the firm’s clients are exploring new market opportunities, which include Asia Pacific. In this case, NPG can provide the mix of technologies and specialist skills required to service automated trading strategies for targeted solutions, such as the Stock Exchange of Thailand. At the same time, a number of local proprietary trading firms are scaling up their models for global coverage, which is where QuantHouse can help provide economies of scale. So, good partners are firms that offer complementary capabilities and have an entrepreneurial spirit that makes them want to investigate possible ways to work together—it’s not a purely transactional relationship.
How do you work with partners to create new ideas to bring to the market?
I believe in Blue Ocean Strategy, a concept introduced by Kim and Mauborgne¹ in 2005 where one seeks to pursue untapped and uncontested market spaces that are ripe for growth and make the competition irrelevant. Again, thinking about working together, QuantFEED and QuantLINK product capabilities are very effective and there are components that may be ideally suited for the buy-side (e.g. proprietary trading) community. Together, we can brainstorm on how to package these components and see if there is substantial demand to bring them to market.
To what extent are economies of scale involved in your value proposition?
I believe the notion of economies of scale is one of the principal drivers for firms participating in the trading ecosystem. For example, by providing access to a new venue in a cost- effective manner, such as the Singapore Exchange to foreign tier-two buy-side firms, there is the potential both for the number of market players and market liquidity to proliferate. This can lead to a lower cost of adopting advanced technology, as opposed to having a buy-side firm face a high barrier to entry as a standalone entity.
What is your view on the development of the automated trading industry in Asia and its future prospects?
I believe the automated trading space represents the epitome of innovation, comprising a mixture of sophisticated technologies and business models. From a local perspective, it’s still in an emerging phase of appreciation that presents many opportunities to further develop trading technologies for clients, including analytic tools, cybersecurity capabilities and algorithmic/quantitative trading applications. Every country in the Asia Pacific region promotes its respective market and new ideas as a result of that nuance. It’s an exciting time for all players involved and one that presents many possibilities for collaboration.
Partnerships have the potential to be very powerful, bringing together different experiences and strengths to create compelling solutions for the marketplace. QuantHouse, a group within S&P Global Market Intelligence is dedicated to working with third-party firms with domain expertise to continually craft and test creative ideas. Eric Neo has developed a unique and compelling offering, and we thank him for sharing his views.