When I joined Beacon last month, as the Head of Banking Sales for North America, I was returning to familiar territory. Almost 30 years ago I began my career working on pricing and risk management software for derivatives at a FinTech company. As I became more interested in the quantitative and financial engineering aspects of the job, I went to Carnegie Mellon University and earned a Master’s in computational finance. That launched me on a 25-year journey through a variety of investment banks, learning and honing the craft of derivatives trading, modeling, and risk management. Through it all I’ve used a variety of different trading and risk applications, systems, and platforms, and am thrilled to be bringing the lessons learned from those experiences back to some familiar faces at Beacon.
Goldman Sachs and SecDB, where it all started
After Carnegie Mellon, I joined Goldman Sachs, first as a quantitative analyst, then as an options trader and manager. The initial tools there, collectively called the Front Office System, were an old-school closed system with fixed bandwidth. It quickly became clear that most traders were constrained by the speed and capacity of these tools.
I was fortunate enough to be there at the same time as Kirat and Mark, Beacon’s Co-Founders. When they presented SecDB to the traders, we saw how much easier and faster it would be to use and to make model changes. As we started using it, the increased speed and efficiency of our work meant that we were delivering quotes faster, earning higher hit ratios with clients, and winning more trades. As the traders gained experience with SecDB, we got better at working with the quants to adjust our models, which resulted in better pricing, higher customer satisfaction, and increased revenue. The right tools in the right hands made a big difference!
Lessons learned: better tools = higher PnL
After spending more than a decade at Goldman, I worked for a few other investment banks over the next 15 years, including Deutsche Bank, Mizuho, and Sumitomo Mitsui. Throughout those positions my traders and I used a variety of different 3rd-party and internally-developed tools. I can tell you that the days when traders don’t care about the technology they use are long gone.
In the modern trading world, speed is obviously a big factor. Some products and pricing models have become very complex. Scenario analysis has to cover a much broader range of potential risks and events. Leveraging the cloud’s elastic compute capabilities to get intraday or even real-time results from these calculations is a significant accelerator for quants and, traders, and risk managers.
Managing cross-asset books and portfolios is also impacted by the technology. Relying on spreadsheets and workarounds to consolidate different asset classes is too prone to error. Rolling up a mixture of products into one screen or risk report that uses the same pricing models and analytics as the traders and quants saves a lot of time and money.
I also learned firsthand the importance of transparent code. Black box systems can sometimes produce unexpected results. The ability to read and understand what a pricing model is doing is always valuable, but especially critical during market shocks or periods of high volatility. Working side-by-side with quants in a continuous improvement cycle to review, refine, and reprice derivatives and other complex instruments is a potent amplifier of the trading team’s knowledge and experience.
Coming back to the future
The Beacon team is building on decades of experience with a variety of platforms, including SecDB, Athena, and a host of other 3rd-party and internal systems, to create a new, unique, and unparalleled collaborative platform for traders and risk managers. Joining the company has been a bit like getting the band back together. I have always had huge respect for Kirat and Mark and the teams that they build to further develop and carry out their vision. They instill a refreshing balance between EQ and IQ that promotes collaboration and motivates people to their full potential. I am excited to be part of this team bringing modern, cloud-native trading and risk management technology to market and helping steer it to greater heights.