CEO CHAT: Mark Davies, S3
Trading and technology – two great subjects that are forever inexorably linked.
One of the firms at the forefront of trading technology is S3. Founded in 2002, S3 is a financial services software company that provides customized solutions to monitor and analyze trade execution for options, equities, and fixed income securities. It offers traders a customizable software platform with the data necessary to understand those factors impacting best execution in today’s fragmented market landscape.
Mark Davies, Chief Executive Officer and co-founder of S3, recently sat down with Traders Magazine editor John D’Antona Jr. to discuss his firm’s core mission, his outlook for fintech and what new offerings the firm will be bringing to the marketplace.
Tell us about S3. What is the firm’s philosophy?
Since the beginning, we’ve really focused on providing the best tools and service for our clients. Since our background was software and large datasets (before Big Data become a known concept) rather than trading, we really needed to listen to our clients to understand their needs. That drove us to the approach we now embrace – even though we now have deep understanding of Best Ex, TCA, compliance and a broad range of market structure topics, we listen intently to our clients to make sure we’re really delivering what the industry needs, rather than just what we think they need. Our Tagline “Improving Trust” is something we embrace. We need to make sure our clients trust us so we can help different clients improve trust between each other – whether we are helping to improve trust between a retail firm and an exchange, an institution and their agency brokers – or a brokerage and a regulator.
What prompted you to get involved in Wall Street and financial markets?
After starting the company, we began doing telecom analytics – matching large datasets against each other. I wrote a general matching engine that was good at matching disparate datasets with non-perfect alignment. In early 2004 an article showed up in the local Austin Newspaper about us and how we were matching data. The last line of the article talked about how this technology could apply to any large dataset, including voting registration, electricity usage and stock trading. Serendipitously, the head trader of a large firm happened to be in town that day, saw the article and asked us if we could help with best execution regulatory reporting. As a small, bootstrapped startup, the answer was an easy yes!
How did you personally get started in the business? What drew you to technology?
Like many tech entrepreneurs, I started programming at a young age. I got my first computer when I was seven years old. As a sophomore at MIT, I started working for startups and ended up working as much as going to class. Upon graduation, I moved to Austin, Texas with the dream of starting a company. When the economy got difficult in the early 2000’s and jobs were hard to find, I along with a few other guys decided there was no better time to start a company, so we did. We didn’t know what we were going to do but we did know we wanted to start our own company. And thankfully, we found some clients to help pay our bills.
Who are your core clients?
Most of S3’s current clients are on the sell side, ranging from bulge bracket banks and major retail brokers to smaller regional brokers. We also have several exchanges and buy-side clients that we serve.
What market-structure issues does S3 look to address? ‘Big Data’? Front-office workflow? Back office?
S3’s mission is to help reduce regulatory overhead, assist sales and facilitate communication between all parties involved.
What is S3 focusing on now? Are there any new innovations or products you’ll be rolling out soon?
I’m glad you asked that! We’ve been hard at work this year building out a completely new product that we’re going to announce in the coming weeks. It will leverage our substantial infrastructure and knowledge in ‘Best Ex’ and will improve our regulatory offering.
What’s the future of fintech on Wall Street? DLT? AI? Something else?
Several times I have referred to myself as a seller of Crypto. I also believe DLT (blockchain) has a use case and is a valuable technology in the world but I think the vast majority of what we hear is hype. I believe AI and machine learning will change the world more than any other technology around today, and not just in the capital markets. Twelve years ago, none of us would have predicted that the way we interact with the entire world would change quite as it did, so I’m excited to see what we haven’t even heard of yet!
SIP improvements draw broad praise, but residual latency may be a sticking point.
Green products are attractive from a financial and risk-return perspective.
Financial institutions need new technology and tools to solve their operational and client needs.
Executive pay continued to feature at the top of investors’ concerns.
FIX Trading Community will be prioritising ESG and sustainable finance this year.