This Company Wants to Revolutionize the Way Traders Talk to Each Other
By Jordan Stone
Cloud9, a cloud communications service provider, announced this week the hiring of German Soto Sanchez as Global Head of Corporate Development. The former Executive Director of Strategic Investments at JPMorgan Chase & Co. JPM 0.02%, called the move to the Software-as-a-Service company a “no-brainer.”
“This was one of the most compelling opportunities I’ve come across in terms of disrupting and transforming an entire industry market,” Sanchez said.
Cloud9 is focused on changing the traditional connection between traders. Today, institutional traders use a device called a trading turret to communicate with other traders in order to execute trades. Although trading turrets have been the norm for the past 40 years, there are a number of reasons this specific area of Wall Street is ripe for innovation.
Because turrets require special hardware, they can cost as much as $10,000 and can take weeks to set up. They’re also stationary, which eliminates the ability to trade away from the desk.
“You’re basically depending on the phone company,” said Sanchez. “It’s all based on 40-year-old technology. It makes no sense to rely on traditional copper wires and for the equipment to cost as much as it does.”
This connection between traders is crucial, especially when hundreds of millions of dollars are exchanging hands.
Cloud9 software provides institutional traders with tools they need to execute voice trading through the cloud and to connect with their trading counterparts with ease.
“We are able to create these connections in a matter of seconds, not days or weeks. And we’re able to do so with no additional cost,” said Sanchez.
How it Works
It works like this: Instead of using a turret, traders can simply download the software and run it through and traditional hardware they own. And unlike turrets, which cost more for each new line, Cloud9 software offers unlimited lines for one fixed price.
The move from phone-based trading to the cloud has been met with resistance by this compliant-heavy industry; Traditional banks are starting to come around to replacing a system they are so used to.
Sanchez continued, “I think what you’re seeing is no longer a debate as to whether or not having a turret on the cloud makes sense. People are now getting comfortable with that. A report came out that states within five years the turret will be dead. Yes, there was some resistance to the cloud, but what you’re starting to see now is comfort. It’s people saying ‘Hey, this works.’”
Cloud9 now boasts over 350 clients in 26 countries, including JPMorgan, Barclays, Eclipse, iCap. Sanchez thinks that’s only going to increase as more banks come around.
“The challenge with banks is they have heightened security and compliance needs. And that’s what we’re going to deliver to them,” he said. “It’s just something that hasn’t existed in the past. We’re being very methodical about it. We want to make sure that we think about the right solutions.”