A Matching Engine for Content

New York-based start-up InfoExchange is bringing the matching engine concept to the pre-trade information-gathering process with a platform that filters content to meet investors' specific needs.

Headed by Dean Stamos, co-founder and former president of the Nyfix Millennium trading venue, InfoEx has created a database that pairs investors' trading histories with information from a practically unlimited universe of content providers. The company is seeking a patent for the technology, which pulls a trader's data from his order or execution management system and develops a profile.

Users tell their trade management systems to provide the matching engine with drop copies and determine a time frame for InfoEx, which began testing and limited production six months ago, to build a profile. The software then matches that dynamic profile with content that providers submit to InfoEx "boxes" and supplies hyperlinks to users. Thus far, InfoEx has signed agreements with trading systems providers Linedata Services and Portware, whose CEO, Eric Goldberg, is a member of the company's advisory board and an investor.

"Any hedge fund today is covered by a minimum of 15 broker-dealers, and the hedge fund managers just can't open up all the research--there's no way," said Stuart Feldman, who until last month was COO of Pomeroy Capital, where he tested the InfoEx system for about six months.

When investors log into the system, called Indicast--short for individual broadcast--they can choose from a series of brief descriptions that describe their content needs. InfoEx users are offered a selection of items on specific companies, as well as sector and industry lists with links to research their profile suggests is relevant. Picking one of the displayed items will take users to the content provider's server. If they're already clients of that provider, they will be sent directly to the information--InfoEx houses the respective security certificates--while non-customers will arrive at a screen inviting them to sign up for that provider's service.

InfoEx lets users refine their profiles by rating the usefulness of research. Customers can also input new content ideas by sending e-mails or instant messages to the InfoEx database, which updates their profile instantaneously. Stamos, who was managing director of trading technology provider Advanced Financial Applications before co-founding the company in February 2007, noted that the service is continually evolving based on user feedback. For example, when investors rank an item's usefulness--ranging from urgent to remove--the recently enhanced rating tool now asks whether they are referring to the industry sector, analyst or research firm.

Filtering Out the Noise

As algorithms and matching engines proliferated over the last few years, the distinctions between them were reduced to nuances, according to Stamos. "Everybody has an algorithm and matching engine, so we said, Perhaps the knowledge we have in matching isn't limited to putting up a trade,'" he explained. "Institutional investors don't want all of Wall Street to know about their trades, not just because they want to keep trading strategies secret but because they don't want to be inundated with sales traders' phone calls. With InfoEx, that investor's trade through one Wall Street firm will result in only information related to that trade arriving from other firms on his or her Indicast page."

Added Stamos, "If InfoEx is monitoring your trading activity and can tell that you've traded three medical-device companies in recent time, and there's an IPO coming in that sector in three months, that may be something you're interested in."

InfoEx has applied its filtering technology to e-mails as well, presenting users with a prioritized set of messages while the full list remains in their normal inbox. "Some of these guys get 300 e-mails, and this could take it down to the 30 most relevant ones," Stamos said.

Traditionally, sales traders have tapped their Rolodexes to provide such information to customers. If InfoEx catches on, their roles may diminish or at least change. "Markets are always seeking efficiencies, and that's why algos have created so many empty seats at trading desks," said Stamos. "We believe it's only natural for technology to migrate from the trading function to the sales-trading function."

Relying thus far on angel investors, InfoEx has about 50 customers and plans to roll out a wider marketing effort when it secures additional funding from venture capital or Wall Street firms, which is anticipated shortly. Newly launched trade matching engines typically face the dilemma of having insufficient liquidity to attract more liquidity, but Stamos said that should be less relevant to InfoEx users--even if they receive relatively few information alerts, those will be tailored to their needs.

Feldman said that Pomeroy was in the process of searching for content providers when it was introduced to InfoEx. "There are lots of different providers of content and the space is pretty fragmented, so it's difficult to find one that will aggregate enough content to make it the sole provider on your desktop," he noted.

Feldman called the vendor's filtering software the most attractive aspect of the service, but also pointed to its ability to aggregate virtually any type of relevant information. Even with InfoEx's currently limited customer base, he was receiving seven to ten alerts a day, and they were generally relevant.

InfoEx is charging a $250 monthly subscription fee for buy-side investors and a $10 per-click fee for content providers, which Stamos said was attractive in comparison to what providers such as broker-dealers pay their sales forces. The company is currently in talks with three bulge-bracket firms to link their content to the system, but the biggest beneficiaries could be the smaller information providers. InfoEx could significantly reduce the need to devote resources to product sales and, as its pool of participating providers grows, may become more effective than humans.

"Most of the investment industry is choking on information overload, especially in the trading world," said Douglas "Buzz" Olson, managing director of Providence, R.I.-based Olson Global Markets, an eight-person research boutique focusing on technical analysis. "InfoEx allows us to get in front of a much wider scope of people than we normally would, and for a much lower cost. Plus, it allows us to advertise to an interested audience."

Olson said his firm covers 4,000 to 6,000 stocks, applying technical analysis to determine when a security's price is about to begin moving and sending out alerts to customers, mostly portfolio managers looking at stock fundamentals. Now those alerts go to InfoEx customers with matching profiles. The content Olson Global sends to InfoEx, currently via e-mail, includes the investment alerts as well as several informational videos Olson produces daily.

Olson Global has seen two sales result from the InfoEx service, which it began using late last year. According to Olson, his firm is in discussions with a third prospect who may white-label the research. "When we receive a message [from InfoEx] saying this person is interested, they really are," he said.