Top FX dealers put $9 million of smart money into FinTech startup

FX dealers that invest in the electronic trading industry and its associated technology could be the innovators of the future.

San Francisco is no longer the financial technology unicorn center. London is.

Where Silicon Valley’s generic all-encompassing technological start up and innovation prowess has led to some mainstream genius within the financial sector, it is less specific to the electronic trading and capital markets business than London’s rising stars.

Now, Octopus Ventures, which is a London-based private equity investor, along with the venture capital arm of Commerzbank have co-led a $9 million (£7 million) funding round into fintech startup Mosaic Smart Data, which the technology firm has said it will use to support product development and international expansion efforts.

Existing financer and client JP Morgan, which is one of the world’s largest interbank FX dealers, also participated in the round, adding to its minority stake in the startup. The bank signed a multi-year deal to use Mosaic’s technology – which helps banks make fixed-income sales and trading arms more profitable – globally in October last year.

“Mosaic Smart Data’s mission is to empower financial market professionals with usable, data-driven tools to ask the questions they need answered and to receive those results in a language they can understand,” said the Moorgate-based startup’s chief executive and founder Matthew Hodgson.

“We want them to feel as though they have the firm’s best quant sitting at their desk 24/7, able to answer any question they have almost instantly. That is the power of smart data analytics.

“This is a mission which is driving incredible interest among the world’s leading financial institutions. With the support of these investors, we’ll be able to take full advantage of the opportunity, accelerating deployment of the Mosaic Smart Data platform for clients and ensuring we keep the platform at the cutting edge of data analytics R&D and smart data technology.”

Commerzbank’s position as a Tier 1 capital markets liquidity provider within London’s comprehensive hub has been a point of interest recently, as Deutsche Bank, the world’s 7th largest FX dealer by market share had been interested in a merger with its German compatriot which would have led to a liquidity monopoly in Germany, led from the two companies’ head office in London.

Last week, the attempt to merge was vetoed, hence Commerzbank is now to go it alone, however its venture capital arm is well known for understanding our industry well, as it was one of the investors in eToro when the firm took itself to another level and entered China.

eToro has for many years trodden a very different path from its peers, and to great gain, especially in today’s post-social trading era in which separate platforms that provide social trading to retail customers whilst charging a license fee to brokerages have become extremely passe.

The unfortunate fading into the background of some of the stalwarts of the social trading business as retail traders become increasingly self-empowered has made its presence felt this month, however eToro continues to go from strength to strength as a fully integrated social investment platform, with a very different ethos to the ubiquitous ZuluTrade or Mirror Trader model.

Joining existing investors which include Russian financial institution Sperbank and Germany’s Commerzbank, Ping An Ventures provided a round of funding in early 2015, sparking speculation that eToro had its eyes on China.

FinanceFeeds asked PingAn Ventures senior executive Lance Liu who during a meeting in Shanghai three years ago what the rationale was for such an investment on eToro, to which Mr Liu, who led the investment, replied “Our core business is investment in financial services firms, and there are many good business models overseas with good technology which China does not yet have. We have a large market to serve so we have a remit to invest in new technology and foreign business model and bring it into China.”

Clearly Commerzbank understands that it has to get into the financial technology sphere, and in particular the non-bank sector of that business.

FX dealers who understand and have a vested interest in our business may well be ones to follow, and could consolidate to make a holistic FX business in future.

Interesting and innovative times…

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