DealVector’s View of the World
We’re often asked: How come DealVector didn’t exist before now? There are several reasons:
1) Silicon Valley never really thinks about the fixed income markets. A stylized picture of the “Silicon Valley View of the World” would start with a garage, move to VC, and end with the IPO. This remains true despite the fact that even IPOs are just a fraction of the size of the public Equities markets, and Equity markets are just a fraction of the size of the Fixed-Income markets.
2) Also, few in Silicon Valley imagine how non-transparent and dysfunctional the fixed income markets can be. Even Wall Streeters that are focused on equities are surprised by what they find in bond-land. And forget about Collateralized Loan Obligations or Synthetic CDOs!
3) Typically, innovators that actually have tried to improve the functioning of fixed income markets have done so by focusing on creating online brokerages themselves. Let’s face it, brokerage can be a really good business! Nobody has taken the “less is more” approach of a DealVector until now.
4) The success and broad acceptance of companies like Salesforce, LinkedIn, and others have shown that business culture has reached an inflection point where users are comfortable putting information into the cloud (despite the NSA). Five years ago this was not true.
5) But in addition to that culture shift, DealVector has an architecture that is particularly sensitive to the considerations of Wall Street users in terms of confidentiality, etc. Nobody wants his or her portfolio to be searchable in the cloud.
6) From a game theory perspective, most players believe they are in a “locally” advantageous situation with respect to information flow, even as they all admit that on a “global” basis the system has problems. Everybody’s got the best information, and everybody’s children are above average. So most players have not felt incentivized to fix things.
7) The mechanics and functioning of the Street Name System, as well as its limitations, are not well understood in the details. So upon first hearing about DealVector, many people assume that the same kind of information that we provide already can be found at the major existing software platform vendors – in fact our information and tools are found nowhere else.
8) Many of the institutions that might be well suited to create a DealVector are inherently conservative by nature. This is the value proposition they present and deliver to their clients. They are not in the business of innovating how fixed income markets work. We are.
9) DealVector operates as a sort of “Switzerland” providing a neutral matching platform for all players. In contrast, any large institution sitting in the middle of the markets that attempted to launch a similar program would need to gain the trust and buy-in of its competitors. This is one reason so many of the online brokerages and dark-pools remain fragmented even today.
10) Because DealVector is not trying to control the relationship or prospective transaction (again “less is more”) its success requires a much less heavy lift than does a brokerage platform. So we have already had several big wins for clients even after just launching.
So, for those of you that have been asking – that’s why!
