I think that Spooz's Algo Server is a good example of Paul keeping his word. Again, this type of technology takes time and money to get on the market!!
Posted by: alliecorp In reply to: string who wrote msg# 17720 Date:7/16/2007 5:48:55 PM Post #of 44144
string, I e-mailed Paul and asked him for some clarification around "We are discussing the acquisition of a matching engine and the possibilities of Spooz making markets in and clearing certain custom spreads and derivatives."
Keeping in mind there is nothing written in stone here but it does give everyone an idea of the futher opportunities that are open to Spooz!
I appreciate that Paul has taken the time out to expand on this for us. allie
Allie,
We have been approached by institutional brokerage firms because they are interested in making markets in custom spreads, baskets, etc. These are the types of brokers where the minimum opening account balance must exceed $5 million. Anyway, SpoozToolz makes it possible to create tradable, “synthetic” symbols that represent custom spreads, baskets, etc. That is only one side of the equation however. In order for these synthetics to actually work, someone must offer liquidity on both sides of the trade. You guessed it, the brokers.
It is interesting that in the present day futures and derivative exchanges occupy a physical space. They don’t have to with respect to today’s evolving technology, but the exchanges exist in an extremely regulated environment where politics abound. It’s about money … a lot of money. (The futures business alone is a $4 trillion business.) Exchanges today simply require an electronic infrastructure where their products trade; where buyers are matched to sellers and trades are subsequently cleared and settled. SpoozToolz and a matching engine (and this is as simplistic an explanation as time allows here) come together to create a virtual exchange that does not require physical space. This is not a new idea, nor are we thinking about taking on the Chicago Mercantile Exchange by dually listing the S&P 500 (the “Spoos”), but Spooz may own one of the best pieces of the infrastructure in the world for this purpose.
Think about this, a broker partner of Spooz could make a market in any custom derivative an institutional customer may wish to trade. The broker could take the other side or, it is likely that the broker can attract another customer (market maker) to guarantee liquidity. (A good analogy would be Lloyds of London who will insure any proposition bet after it has made an attempt to compute the probabilities and access the risk of loss.) The trading could occur on the SpoozToolz platform for a fee. Viola, Spooz has a transaction based revenue model. Isn’t a growth stage software company with a transaction based revenue model the Holy Grail? Oh, I forgot to mention that Jame Groves and Dr. Peng He have both been heavily involved in developing matching engine technology over the course of their careers.
Please remember that these thoughts are forward thinking and there are absolutely no assurances or representations that Spooz will ever act upon a single idea presented here, but there are certainly possibilities for our company to accomplish stunning victories as we move forward. It also occurs to us that Google or Yahoo could become the largest virtual exchange on our planet overnight, with some help. Finally, an EBay for the mega-rich to swap custom securities, just what the world needs!
"One way I interpret this is that brokerages who employ the Algoserver will have an incentive to promote SpoozToolz to their clients who can then use broker-supplied algorithms (or I suppose algorithms from other sources) in their trading. I guess the algoserver generates templates in the form of Excel spreadsheets that should be easy to transmit to customers"
Great insight Song; I agree with you. The Algoserver could be a great catalyst for increasing STv2 use by traders, brokers, and customers. IMO
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