The investment banks have made considerable investments in technology to support their capital markets businesses. As a result, when issuers interact with bankers they are at a considerable knowledge and informational disadvantage. A core mission of Matthews South is to eliminate this historical asymmetry and have our clients be the most informed participants in the capital markets. We have made a significant investment in developing a capital market software platform to achieve this mission.
As a startup with no legacy infrastructure, we are able to take advantage of the latest software and hardware technologies to build a best-in-class capital markets analytics platform. Our software allows us to provide our clients with better analytics and insights than any investment bank. Importantly, unlike the banks, we designed our software as a cloud-based, web application so that we could also make it directly available to our clients.
With our advice and software, our clients make better decisions, achieve better outcomes, and pay lower transaction costs.
Computational Challenge: Big Data + Complex Transactions
We believe that quantitatively-informed decision making by our clients yields better outcomes for their transactions. Almost all the information relevant for capital markets decision making is available in electronic, machine readable form. Our software allows us to systematically process vast amounts of information in a low-touch, cost effective manner.
For example, we analyze listed options to calibrate market implied volatilities for thousands of equity assets; we calculate implied credit information for hundreds of convertible bonds based on observable traded prices; we process tick-level stock trade and quote data to generate broker execution quality analysis; parse EDGAR filings to determine current bondholders.
We have to analyze a vast amount of data to advise our clients on complicated transactions (e.g. convertible bonds, call spreads, accelerated share repurchase, enhanced OMR). They are complicated in their mathematical formulation. The solutions are complex and, at times, computationally expensive. In addition, client specific one off situations often require custom quantitative solutions (e.g. novel call feature in a convertible bond).
Optimizing Speed and Cost with “Elastic” Compute
Our cloud architecture allows us to elastically manage our compute resources. We can dynamically provision additional virtual machines when we need it and intelligently distribute the work among the machines. For example, when calibrating the market implied volatilities for a large number of equity assets we will spool up a dozen CPUs for an hour. Our flexible setup allows us to keep the costs down for ourselves and our clients: we get precisely as many machines as we need for as long as we need.
We build all our pricing models in-house. This allows us to control how to structure and optimize calculations in a way that fits our use case best. When bespoke solutions are needed, we have the full flexibility in deciding whether to employ 1 or N machines to complete the task.
Flexible Framework to Support Wide Array of Financial Products
Our clients transact in a wide array of products. The products can be standard (e.g. 5NCL convertible bond) or non-standard (OMR grid indexed to trailing average stock price). Our platform is designed to price and run analytics on both situations seamlessly.
When the analytics are such that they are likely to be performed repeatedly, for multiple clients, we employ high performance programming languages to optimize for speed and efficiency. We use scripting programming languages for their ease and flexibility when the situation is bespoke and requires a quick turnaround.
We are equally flexible when it comes to delivering the results of our analyses to our clients.
- Clients can access and manipulate the analyses, on demand, in our web application
- Our reports can be “pushed” via automated emails
- Our advisory team can use the quantitative capabilities of our platform to create reports and presentations for our clients
Financial transactions can contain sensitive information. We have implemented robust security protocols to safeguard information. Our platform is equipped with many security features, including:
- Hosted security solution deployed within AWS with one of the highest levels of security certification and allows for bespoke configurations
- Modern encryption techniques for all data (both at rest and in transit)
- Creation of secure backup databases
- Passwords with one way encryption
In every capital markets transaction, our clients face sophisticated investors or counterparties. Our software platform allows us to provide differentiated knowledge and analytical insights to clients. This allows them to gain the structuring and pricing advantage in their transactions.
The markets evolve and the participants get smarter. New products and new features of existing products are introduced. New quantitative techniques are developed and new types of analyses become relevant. Our quantitative capabilities and modern software and hardware architecture allow us to continuously adapt and innovate for the benefit of our clients.