Last week there wasn’t a Weekly Wrap because I was away visiting family. This week it’s up late because I wanted to focus on the Symphony-Cloud9 Technologies acquisition that was announced at the end of last week, and for that I had to first speak with Symphony CEO Brad Levy, which didn’t happen until Monday afternoon. Anyway, apologies.

Before I get into my conversation with Levy, first, if you work in the field of market data or are just an enthusiast, I highly recommend you check out this deep-dive feature by Josephine Gallagher. It looks at the community group that includes JP Morgan, Deutsche Bank, Amazon, and the CME, and its plans to showcase over a year’s worth of work in a bid to drive broader adoption of its digital rights language. It’s wonky, but highly informative. Essential reading for you data nerds.

OK, let’s get to it.

Levy’s sonata

When I first heard that Symphony had acquired Cloud9 Technologies, I have to admit that I was a bit surprised. I’ve always found Cloud9 interesting, from its NLP capabilities and cloud offering to its embrace of interoperability and partnerships with others in the comms space. And its investors include Wall Street heavy-hitters Barclays, CME Group, JP Morgan, Point72, and UBS.

The fact that Cloud9 was acquired didn’t come as a surprise, but when I learned it was Symphony, I said this to my colleague Max Bowie: “Wait, doesn’t Symphony already do what Cloud9 does?”

That question led to other questions: Is Symphony making this move to patch up a flaw in its offering? Or is it trying to take Cloud9 off the table so other competitors can’t gobble the fintech up? Or was the deal hoisted upon the duo by their shared investors, Barclays, JP Morgan, and UBS?

Being that this was Brad Levy’s first major move as the newly-minted CEO of Symphony, I asked him these questions. Below isn’t a Q&A, though some of the answers are longer than I’d typically use in an opinion piece because I’m sure that you, the reader, care more about what he has to say, rather than my opinions on the acquisition. Additionally, some parts I bolded because they stand out to me as hinting toward change in the company’s direction, if not an entirely new vision.

So what does Cloud9 bring to the table? Levy said they are not simply removing a piece from the board to prevent competitors from taking it. Rather, Cloud9 offers something Symphony doesn’t: professional-level, trader-voice telephony, with network lines inside and outside of firms. 

Symphony has become synonymous with chat: one-to-one chat, multi-party chat, and providing organized content around those offerings. As such, its focus is on the collaboration stack, but while the company does things that are similar to telephony—and they have been developing a click-to-dial component, similar to what you see on WhatsApp or iMessage—what Symphony provides is not comparable to the quality or features one would expect of high-end telephony and hard or soft trading turrets.

“It’s a more complex technology to do it right than people realize,” Levy said. “We could do those things maybe ourselves, but, like a lot of things, it requires commitment and focus, and they have that. We thought that by combining ourselves with that, we could provide a better communications platform from the front office all the way to the back office.”

What Symphony will look to do with Cloud9 is combine the latter’s telephony into the workflows Symphony provides downstream. “Most important, both of us need to take that very specific specialized kit, and deploy it [in the markets Symphony serves] front to back,” he said. “Neither of us [could achieve that] on our own, as much as combining now and delivering solutions in the equity market, the bond market, the operations space, and that’s what we’re able to do now because we just have a much larger set of capabilities after the acquisition.”

Now, I bolded that bit because throughout our conversation, Levy made it clear that under his tenure, Symphony will try its hand at becoming a staple solutions provider for an array of trading desks and other coverage areas. More on that in a second, but first, it’s important to look at Levy’s plans for future deals. In the release was this nugget: “The acquisition of Cloud9 Technologies is expected to be the first of several acquisitions for Symphony.”

Levy told me the company’s “current cash position for what we want to do both organically and through acquisition is good,” and that he does not believe they’ll need more cash for those future acquisitions. He also noted that those transactions won’t necessarily be all-cash deals.

“Whatever happens, some of that—or a lot of it—will be stock-for-stock, so it’s hard to get a sense of really what the cash needs are from the outside,” he said. “For the foreseeable future, our cash position is good. This deal is funded. The ones we have in our sights are basically funded, and that will be somewhat dependent on how much we slide around using cash or stock in deals.”

So under Levy, Symphony is going to be acquisitive, which wasn’t necessarily the case under its previous CEO, David Gurle.

Levy was brought into the Symphony fold because he has deep ties to Wall Street. He spent nearly 18 years at Goldman Sachs. He was at Markit (and then IHS Markit), where he led the MarkitServ and Loan Platform businesses. He was the chairman of the Fintech Open Source Foundation, or Finos, which grew out of the Symphony Software Foundation. He was a member of the Commodity Futures Trading Commission’s Technology Advisory Committee.

Levy was brought in as president and chief commercial officer last year to help Symphony focus on the front-to-back workflow needs of capital markets professionals. His first big win at Symphony was the rollout of its know-your-customer (KYC) offering, which helped move the company into client and trade lifecycle management. And when the vendor announced that Levy would replace Gurle, it hardly came as a surprise.

It would seem, to me at least, Symphony is positioning itself to be a key provider in the application interoperability space. As evidence, I give you this snippet:

“I think people want one front-to-back solution until they have only one front-to-back solution. And then they don’t want one, they want an ability to have one if they want, and then to come and go from that one when they want. I think people are a little tired of ‘Here’s the new front-to-back,’ and [the answer] is probably something between one front-to-back solution and a mass of disconnected things.”

He continued: “When I think of Symphony’s forward [progression] in terms of acquisitions and strategy, generally, we’re definitely focused on financial services and we’re not going to wander around multiple industries like government [or] healthcare—we’ve done that a little bit in our history and I think it’s a fine strategy, it’s just not why we exist. And for the next couple of years it wouldn’t make sense for us to deviate very much from financial services.”

When talking with industry contacts about Symphony, one thing I’ve heard numerous times is that there was frustration among investors and users that Symphony had lost sight of what it was created to do by a consortium led by Goldman Sachs. Its purpose was to provide an open-source communications and workflow tool that would be interoperable with other trading-specific, third-party tools via a cloud-based, software-as-a-service model. Why would a company created by banks, brokers, and asset managers worry about health care and defense?

With Levy at the helm now, it would seem Symphony wants to find its roots and grow from there. This next quote is long, but it shows exactly how Symphony is going to position itself going forward.

“We’re not just about trading in markets; we are not just about research distribution. We are new-issue and secondary. Even the idea that we can do a lot in the new-issue primary markets probably was not thought of even as much as a year ago, and now it’s a big strategy for us.

“The idea that the back-office community has never been served properly, we can just dwell all day long there and probably do a good job adding a lot of value, but we still need to make sure the back is better connected to the front. So we definitely want to win the front office—and we should. We should serve the back office because almost no one does in the way we can. And more importantly, we can link [applications so as to not] keep anybody in a box—we can allow them to create a box or come and go from other boxes more easily.

“So, I think we’ll acquire companies that are focused on financial services [to achieve] that. Cloud9 is financial services-focused, and is an adjacent and relevant technology. I think our next three, four, five deals will look at capabilities that are focused on finance, but aren’t necessarily the proprietary data, the last-mile of workflow. I don’t necessarily want to be the fintech app, or the dataset, or the trading venue, or any of those things. 

“We want to stay away from being too far up or downstream, but we also don’t want to deviate and wander away from financial services. I know that sounds like we’re nowhere, but we’re not the fintech, we’re not the Mega Tech—we call ourselves tech for finance. Tech-led, finance-focused. And whether it’s blockchain firms, compliance, AI/NLP/ML, containers, companies in the communications space, generally—there are a number of areas I think that have their own tech-for-finance companies that probably could either be better partners with us, or even acquired by us.”

And since Levy brought up Mega Tech—or as we like to call it, Big Tech—I told him that it’s always been my thinking that Symphony would be outright acquired by a Big Tech provider like Microsoft, Amazon, or Google, or that one of those companies would become the controlling investor in the company.

Levy said the pandemic has rapidly accelerated ties between Wall Street and Big Tech.

“Zoom didn’t exist really for our world, and now it’s a verb. Slack gets bought by Salesforce. Teams is rolling out [new services], and Microsoft owns the stack pretty much. Google is trying to up their game in cloud and become more relevant in the workflows. Amazon has the big presence but doesn’t do much more than that in our space.”

He said it’s still “very early days” when it comes to how the likes of Amazon, Microsoft, and Google are positioning themselves on Wall Street beyond their simple cloud plays, but it sounds like Levy thinks Symphony can serve as something of a middle ground if Big Tech continues to expand into financial services.

“What is the right thing for the long-term industry in working with these very large technology companies that could be incredibly helpful, or so big that they may not know enough about you to care in the right way? We’re a bit of that bridge in bringing them in and managing them in a productive way. They will be disruptive in some spots and helpful in other spots, and so we’ll wait.”

OK, so let’s say it’s not a Big Tech company coming in and buying Symphony—what about an IPO? Gurle has said on numerous occasions in the past that he wouldn’t consider an IPO until Symphony was profitable, which the company had hoped to achieve by the end of this year.

Here’s what Levy had to say about the idea of an IPO:

“For me, it’s important not to be distracted by something like an exit. I’m not distracted with that—our leadership team is not. We’re a seven-year-old company, so we have to be mindful of people feeling trapped in an illiquid, private security. So I think you’re really long in the tooth on that by about year 10. I do think we need to find ways maybe over time to create a bit of a liquidity for people that are in the company and have been here for a while, but that’s nuance and it’s not relevant to the question.

“We have so much to do and so much value to go after, the idea of trying to manage to anything like profitability or an IPO, actually, will have us making short-term decisions, and we think we can grow our business very well for the foreseeable future as a private company. We think there’s a lot of ways to go public, there are a lot of ways to get liquidity and a lot of different mechanisms coming up every year now. And if you think about it, there’s a view that you can even stay private longer and that might be better to continue to be invested for the long-term, rather than looking over your quarterly shoulder.

“I’m not against being public, but I think you’ve got to be really ready and really want to be in that mode, and I’d say we have at least few years before we should be thinking exit, including an actual IPO.”

Finally, I asked Levy if he thought Symphony was “indispensable” to users. He said that the company’s engagement “went through the roof” last year during the pandemic, and usage “went up dramatically.” According to the most recent figures provided by Symphony, the number of active users increased from 318,000 in December 2019 to 410,000 by October 2020, while the number of messages sent went from 56 million to about 175 million over the same span, and meetings created went from 26,000 to 146,000. 

He acknowledged that firms are “trying to figure out how does this work with my workflow that exists today in the OMS, email, terminal? … We all (and he specifically mentions Zoom and Teams) benefited from that burst, but it does seem like everybody is trying to figure out, now what do we do? I think overall that benefits us because we have a sense of what we can do in the markets and workflows, and we don’t need to be led there as much; we can lead the industry into solving collateral management and settlement problems.”

But, is Symphony indispensable? Here’s what he had to say, and I’ll allow him to close the show:

“I think there are more users today than we know that if we just took it away, there’d be a lot of screaming. I can’t say it’s 500,000, but it’s a non-trivial amount of people that would really not like if they had to go back to not having Symphony. And even with clients that maybe pull back a license, we hear that. People definitely depend on our platform now, whether it’s 10% of our usage—like 50,000 people or more—it’s a big community of people. But at the end of the day, our ability to solve real problems in workflow and partner up doing it, is going to make us the thing that is the promise of Symphony.”

The image at the top of the page is “A Symphony” by Frederick Stuart Church, courtesy of the Cleveland Museum of Art’s open-access program.