Messaging software, whether via trading terminals like Bloomberg and Reuters, enhanced SMS apps such as WhatsApp or WeChat, or instant messenger software like AIM and Skype, has become entrenched parts of the financial world. Used to share trading ideas, contact colleagues and acquaintances, and provide support to customers, use of instant chat applications has only gotten greater within financial firms.
Among trading desks, one of the oldest staples is Bloomberg’s messaging platform which allows for direct private chat as well as group conferences. Although viewed in high regard by users, some firms have begun to reevaluate their need of the high-priced platform. Unlike scalable licensed software which can be purchased as a standalone chat product, Bloomberg messaging is only available to users of the $1,700 per month Bloomberg Terminal.
The high costs though have created an eco-system of filtered high-end platform, which limits participants of the messaging platform to primarily employees of banks, hedge funds, asset managers and high-net worth traders. For many traders, having the ability to connect with such a wide array of similar users provides an opportunity to share ideas and gain a pulse of movement in the market. However, while few argue that Bloomberg messenger provides value to users, its high costs have led firms to pursue alternatives.
In addition to the costs, messaging has come under fire from regulators who have attributed the product to assisting in market manipulation, such as in the LIBOR scandal and the ongoing FX Fix price rigging investigations. At issue is whether traders have been using messaging platforms to create cross-firm groups to discuss customer accounts in order to front run the market or manipulate prices. As a result, several banks have banned the use of cross-firm messaging.
While the regulatory concerns affect all messaging software, Bloomberg specifically was the target of privacy complaints last year. In question were revelations that certain Bloomberg employees had access to viewing messages that were thought to be private.
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With its high prices and questions about data security, it makes sense that financial firms have been investigating methods to replace the need for Bloomberg’s messaging platform from across their sales, trading and analytics desks. While launching in-house alternatives is a simple endeavor, the difficulty comes in getting other firms involved to recreate the same financial chat value that exists with Bloomberg.
Among initiatives to create a chat competitor, Goldman Sachs has been attributed to be heading a group of financial firms involved with potentially investing in Perzo, a provider of secure and private messaging tools. According to Reuters, along with Goldman, potential investors include Morgan Stanley, JPMorgan, Bank of America and Black Rock, among others. Unlike individual single company investments, the arrival of a group of funding companies would connect stakeholders immediately and provide a sizable array of users to any potential cross-firm messaging network. Having multiple banks on board is similar to models used to launch trading exchanges and dark pools which have consisted of banks and brokers taking equity in the new venue.
If funding takes place, it would mark the second such known investment in the messaging space in less than two months. In June, the CME Group was listed as among investors in a Series B $30 million funding round by Wickr.
Similar to SnapChat, Wickr provides app users the ability to send self-destructing messages, videos and images. Providing greater control to users, Wickr provides the ability to select a duration before the message erases. When publicly announcing the Series B funding, Wickr stated that expanding their platform for the financial industry was an area within which they plan to use their additional resources.
For the CME Group, the investment in Wickr was the first of their new Strategic Investment Group which was created earlier this year to take minority stakes in early stage technology companies. Wickr themselves didn’t provide details of how the messaging platform will be customized for the financial sector. However, with the inclusion of the CME as an investor, it would be a safe bet to assume that Wickr will be working on a third-party app that can be integrated directly onto trader platforms.