In this week’s Forex Magnates Executive Interview we sat down with David Kedmey, the President and Co-Founder of EidoSearch.
During the interview Mr. Kedmey showed off some of the usefulness of his service, by taking a Bitcoin price chart and running it through his system, at Forex Magnates’ request. Because the price of tulips was not available, we asked to compare it to futures and almost immediately we could see the instances in the past, similar to the chart we requested, and their developments. The system was not yet connected to a Bitcoin price feed, thus showing it is easy to add new data on demand.
At EidoSearch Mr. Kedmey leads business development functions including fund raising, customer development, identification of target markets, recruiting of sales and operations staff, and development of distribution channels and data vendor relationships.
He previously worked in the mergers and acquisitions group in the investment banking division at Oppenheimer & Co in New York. He holds an M.B.A. (with Honors) in Finance, Accounting and Entrepreneurship from the University of Chicago Booth School of Business.
Before joining Oppenheimer & Co., Mr. Kedmey worked at the Alvery Bartlett Group, where he raised capital for its hedge fund management company and for private placements in real estate and energy.
Dr. Xiao-Ping (Steven) Zhang is the CEO and, similar to Mr. Kedmey, a Co-Founder of EidoSearch. He is a Professor in the Department of Electrical and Computer Engineering, and the director of the Communications and Signal Processing Applications Laboratory (CASPAL) at Ryerson University.
Dr. Zhang has over twenty years of research and development experience in the field of information processing. He was a leader and key player in projects for companies and institutions such as U.S. NASA, Applera Group, Ontario Hydro, and Epson Canada and others. Dr. Zhang received an M.B.A. (with Honors) in Finance, Economics and Entrepreneurship from the University of Chicago Booth School of Business.
Dr. Zhang holds three U.S. patents and has three pending patents on various innovative signal processing and pattern classification technologies. His advanced algorithms are incorporated into many widely-used commercial software products, including electroencephalography (EEG) software (e.g., MANSCAN®) and genosequencing and genotyping products (e.g., DNA Sequencing Analysis™ Software, GeneMapper® Software and ViroSeq™ HIV-1 Genotyping System). In the area of finance, he created a new risk management system, a hedge fund replication model, and investment strategy tools using dynamic market factor analysis for Tremont Capital Management.
Please detail what led you to co-create EidoSearch.
Dr. Zhang and myself, as the Co-Founders, developed the intellectual and business foundation of EidoSearch while attending the University of Chicago Booth School of Business. We recognized that we could take the powerful technology that Dr. Zhang had applied previously to projects with NASA and The Human Genome Project, and apply them to the overwhelming amounts of time series data facing the financial markets.
We found that Dr. Zhang’s proprietary information processing technologies, in particular content-based search techniques, are ideally suited for financial practitioners exploring relationships in time-series data. Investors and traders think in terms of examples, i.e., we make decisions based on what we’ve seen happen before. We allow to rapidly and accurately find reoccurring patterns in markets and quantify outcomes based on how market participants have responded to those patterns.
From there, others in the industry recognized our potential including early adopters at several of the largest financial institutions in the world. In 2012 we were named one of the top innovative technologies applied to financial services by the FinTech Innovation Lab in New York.
Please explain the service that you provide clearly and in detail.
At the core of the EidoSearch platform is our search engine, which helps financial professionals to perform analysis using sample time-series patterns. Example patterns include the dynamic behavior in securities prices, interest rates, housing starts, or proprietary factors. These patterns are formulaically complex to describe; however, through content-based search, the analyst queries using the pattern itself to rapidly search for related occurrences in a large database—and then tests various investment hypotheses or trading strategies under these circumstances.
In other words, our clients can use pattern recognition technology to statistically quantify the way investors are likely to respond today by studying their behavior during similar market and trading environments in the past – without writing a single line of code. For example, we can take the last 3 month price pattern in the Dollar Yen, identify the most similar instances of this pattern in the Dollar Yen through history, capture how investors traded in the next one week and project return outcomes…all within seconds.
EidoSearch also allows you to powerfully search and understand the linkages across asset classes. Taking the example in the Dollar Yen a step further, you can start off first by looking at recent price trends in crude oil prices or US Treasury Rates, compare these to similar historical instances of these patterns, and then look at how the Dollar Yen traded during these most similar markets in the past. These are not uncommon studies, but our ability to do this with statistical rigor and speed generates tremendous value for the end user.
Our methodology scales to analyze thousands of watch-list and portfolio stocks, or to understand and predict behaviors of currencies, futures or any other micro/macro-economic time series. The primary benefit to the customer is the ability to increase revenue generated from investment ideas by largely expanding the number of investment hypotheses tested and enhancing the quality of research.
How can companies in the FX market benefit from it?
FX markets are especially pattern driven as compared to equities. We don’t have financial statements to analyze, a management team to evaluate or product lines to review. Patterns in FX markets provide actionable information, and our tool now equips the analyst or trader with the speed and statistical rigor to identify reoccurring or compelling price patterns emerging right now and to quantify the outcomes.
Mr. Kedmey then referred us to a quote by Jamie Saettele, Senior Technical Strategist, Daily FX: “EidoSearch bridges the divide between classical charting principles and statistical inference. This combination of subjective and objective technical analysis is an evolution for the industry and is a powerful tool for the modern technician.”
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Please explain the technology used for the development of your service, and its origins.
EidoSearch allows financial professionals to perform content-based queries against financial time-series data. Our capabilities can be accessed through our own feature-rich front-end application (GUI). We are also developing a set of APIs so that customers can programmatically access the engine. At the core is the EidoSearch engine – a entirely proprietary architecture, set of algorithms and file structure – that allows you to search with great speed and accuracy for reoccurring instances of a pattern. We currently host a production instance of the platform on the Amazon cloud
What is the ethos behind the establishment of the company, is there a specific meaning for the name Eido?
The word “Eidos” is a classic Greek word that means “to see.” This supports our belief, and tagline, that “Forms Shape Ideas”. FX market participants understand this better than anyone, and we’re delivering a tool that will assist our clients’ efforts in identifying the forms or patterns that are meaningful and profitable with both speed and objectivity.
What type of customers are you targeting for your service? Can you share examples of known clients who use the service?
Our customers include some of the largest mutual funds, hedge funds, pension fund managers, CTA’s etc.
Mr. Kedmey shared some testimonials from users to show the variety of clients:
Matthew Granade , Former Co-Head of Research, Bridgewater Associates: “The flexibility and speed of the EidoSearch engine allows me to test ideas within seconds that used to take days. This is the most powerful tool I’ve seen for comparing recent trends to historical occurrences and for projecting outcomes across asset classes.”
Kenneth Goodreau, Chief Investment Officer, TIG Advisors: “All too often financial analysis is fraught with personal bias. EidoSearch very quickly allows you to test the validity of your mosaic against a multi-factor backdrop, separating opinion from fact. A truly essential addition to the risk management tool box.”
Charles Trafton , Portfolio Manager, The Boston Company Asset: “Global markets ebb and flow, often with recognizable patterns. EidoSearch technology allows my team to analyze any time series efficiently, with an unbiased view. We quantify opportunities in stocks, bonds, commodities, macro data and even our proprietary measures with Eido data to assess alpha forecasts with more clarity.”
Why not individual retail-level FX, commodities or stock traders?
We are currently focused on the institutional market, but certainly are considering opportunities to reach a broader audience as well.
Please detail your cost model and how do you position your service compared to the competition?
We charge on a per seat basis depending on the number of seats licensed at each firm. There are many quality software companies providing subjective or visual-based research or classical technical analysis to the FX Markets, but the use of our proprietary, patented information processing technology makes us truly unique in our ability to provide statistically driven, predictive analysis to our clients.
What do you seek to achieve with EidoSearch, and how do you go about achieving it?
We are building the most powerful, flexible and broadly applicable search platform for the financial industry. We are constantly innovating and responding to customer needs. Investors continue to be overwhelmed with data and how to get value from data, and EidoSearch is uniquely positioned and focused on providing game changing solutions to our clients.
The heart of the company is our technology, and we have years of innovation ahead of us.
Where do you see EidoSearch in the longer future? Are you looking to grow independently or to be acquired by a big player?
Our strategy can take many forms, but for now we are looking to grow organically. We are just scratching the surface on the application of our technology to Financial Services, and we are excited about our current opportunities and the ones that lie ahead.