Forefront Communications

Merger Market: Capital Markets Startups Step up to Help Wall Street Navigate Pandemic

Alexandra Hamer

Alexandra Hamer

The coronavirus pandemic and connected market turmoil has pushed Wall Street firms to adopt new capital markets technology solutions at a faster pace, spurring opportunities for startups that have spent years developing innovative solutions.

Fintech vendors are seizing the opportunity to demonstrate offerings in areas ranging from trading venues, market data infrastructure, voice trading software and tools to manage clients and research, several sector executives said. They hope this momentum will continue once the COVID-19 outbreak recedes.

This in turn could trigger more growth investment opportunities and M&A, according to several sector advisors and investors. At this stage, many high-quality startups have not reached the scale to be attractive targets for strategic acquisitions, one of the sector advisors said. But he noted that the firms may become targets after growing for a few more years, making now a good time for private and growth equity investors to support growth.

Ahead of the COVID-19 crisis, markets were already moving towards increased electronic trading across asset classes in response to tighter regulation imposed since the financial crisis and the emergence of a new class of fintech vendors to provide the necessary technology.

“If you look back to the events of 2008, or the events of Superstorm Sandy, which largely impacted many of the customers that we aim to serve, this time around, the investment enterprises are better prepared from a systems standpoint,” said Chris Mackey, CEO of MackeyRMS, a research management system provider for investment managers. Founded in 2011, the Boston-based fintech firm received a significant equity investment from Resurgens Technology Partners last year.

In enterprise market data, established players include MayStreet, Vela Trading and Exegy. Some firms built in the late 1990s could also gain attraction such as Bridgepoint Advisors and Summit Partners-backed Calypso Technology, and privately-held FlexTrade Systems, according to a sector advisor.

Dash Financial, a Chicago-based options trading venue, saw its average daily trading volume exceeding 20% of the OCC’s total options volume in late March, compared to an average market share of 15% to 16%, said Stino Milito, co-chief operating officer. Founded in 2011, Dash is currently backed by Flexpoint Ford.

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