Goldman Sachs makes $20m investment in HFT tech provider

Not much money in high-frequency trading? Goldman Sachs begs to differ.

The US investment bank announced on Tuesday it had spent $20.5m on an undisclosed minority stake in Perseus, a six-year old US technology company that provides banks and high-speed traders with cutting edge tools.

Privately owned Perseus confirmed Goldman would not be involved in its daily operations, nor have a seat on the board.

Nevertheless, the bank's investment illustrates how an industry that had once spent heavily on owning state of the art technology is increasingly turning to outsourcing as software and telecom costs fall, and profits become harder to find.

In the six years since its foundation, Perseus has had an annual compound growth rate of 131 per cent by providing the tools used by high-frequency traders to gain an edge in the market.

Through growth and acquisition it has pushed into managed services and hosted networks that allow traders to execute deals from servers placed in data centres next to exchange matching engines - a practice known as co-location.

"We see a great opportunity in the financial sector in general, and Perseus in particular," said Terry Doherty, director of the speciality lending group at Goldman Sachs.

"Not only is their business performance exceptional, but they have the potential to dramatically shift the way that the global markets engage by introducing faster and more secure managed services to the industry."

In addition, it has one of the fastest telecom connections between London and New York, able to conduct the 6,000 mile round trip in just under 70 milliseconds. It has also created a microwave network for trading that connects all of London's main financial markets data centres.

"The Goldman investment is an important accelerator of our business," said Jock Percy, chief executive of Perseus. He added the New York-based group would look to expand its global network, which already covers 300 exchanges.

The deal comes just over a year after Goldman signalled it had a change of stance on high-frequency trading. Gary Cohn, chief operating officer of Goldman Sachs, publicly declared that Wall Street's push for speed had gone too far. It also sold Spear, Leeds & Kellogg, a broker it bought for $6.5bn in 2000, to Dutch electronic market maker IMC Financial for just $30m.

Perseus is also pushing into cryptocurrencies and gaming, although around 80 per cent of its revenues have come from financial services.

www.ft.com/tradingroom

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation