Tradeworx Sells Trading Arm to Focus on Fintech

The trading business will now be known as Blueshift Asset Management and will be led by Mani Mahjouri, who takes on the dual role of chief executive officer and chief investment officer. Mahjouri was previously Tradeworx’s chief investment officer. Mike Beller remains CEO of the renamed company and Thesys Technologies, the technology arm before the spin-off.

Beller tells WatersTechnology that when Thesys Technologies started out as a unit within Tradeworx, it initially leaned heavily on the brand recognition of Tradeworx, but over the years Thesys has cemented its reputation in the industry and can now stand on its own, thanks in part to a number of high-profile contracts.

Most notably, a year ago, Thesys Technologies was named ahead of 31 vendors to build, implement and maintain the Consolidated Audit Trail (CAT), an industry-wide database of trade information the company is still in the process of developing. It was also selected by the Securities and Exchange Commission (SEC) to build the Market Information Data and Analytics System (Midas)—the regulator’s data visualization tool—after the Flash Crash of 2010. 

“The first and biggest catalyst for the spin-off is the rapid growth of the technology side, with the CAT and other projects,” says Beller. “At the same time, the trading team also had ideas over how they can grow as a separate business.”

Beller says Thesys Grpup—which will comprise Thesys Technologies and Thesys CAT—will be focusing on the development of what it calls “market-structure platforms,” that create a more open and connected system for the capital markets.

“Our vision is to create what we call market-structure technology, which is a modular, open-system approach to building systems in the capital markets industry where historically systems are closed and unconnected,” he says. “We understand how data is connected to trading systems and how it can be easier to build out systems for the industry.”

The spin-off echoes similar moves of other firms selling their trading businesses to focus on providing technology platforms to the industry. A recent example of this includes interdealer broker Icap, once the largest in the world, which sold its voice broking business to Tullett Prebon in 2016 and renamed itself NEX Group with a focus on technology provision.     

Shifting Priorities

Blueshift, which will focus on quantitative investing and high-frequency trading, looks at the split as a means to hone in on its priorities—discovering alpha for investors and not building technologies for the industry as a whole. 

“We’re focused on discovering and delivering alpha,” Mahjouri tells WatersTechnology. “Technology was a means to understand the changes in the capital market, and in the early days, it made sense to create technology resources built by traders for traders; but now the market knows how to build trading systems. Our goal, as a group of scientists, is to focus on specific elements of technology that aren’t commoditized, where we feel our efforts produce outsized returns. As HFT becomes more complicated, the cost structure of maintaining all that technology becomes a limiting factor.” 

He adds that the firm will still build proprietary tools, where necessary, but they will only be for internal use and not white-labeled to the greater market. 

Blueshift was able to sell a minority stake in its business to an investor group led by private-equity firm White Oak Equity Partners for an undisclosed amount. Mahjouri says the deal closed at the end of 2017 so the company was able to launch its fund in the first week of January.

White Oak will provide capital so Blueshift can launch its business and trading activities and to acquire technology it developed while part of Tradeworx and will be working with Blueshift on its long-term strategy, expansion of its team and operations and development of the business.

A White Oak spokesperson tells WatersTechnology the company was attracted to Blueshift for its experience and investment strategies.

“White Oak was attracted to the Blueshift team’s longstanding collaborative history, extensive trading experience, and unique approach to investing,” the spokesperson says. “We invested in Blueshift because of their thought leadership and our view that the firm is well-positioned to generate strong risk-adjusted returns in today’s investment environment.”