Financial market participants typically use expensive technology solutions for maintenance and upgradation. To ensure cost-effective solutions, uTrade Solutions, a financial technology Startup, established in 2011 provides multi-asset trading platforms, order & risk management systems, low latency infrastructure with algorithms, pre and post trade analytics, and data analytics products at reduced costs across the entire financial services ecosystem. Their products are widely used by global financial institutions and their end customers. Speaking to Supportbiz, Co-founder and CEO of uTrade Solutions Kunal Nandwani shares the trends, benefits of open source product of the financial technology industry.
SB:What are the trends shaping the Fin- tech industry in India?
Kunal: What’s salient to India is the pace of technology adoption at the end user level is faster and greater in magnitude than that of the banking system. Banks and financial institutions in India do lag many of their counterparts in developed markets of the west with respect to their fin-tech-related activities. This has paved the way for enterprise fin-tech startups operating in the BFSI and capital markets space to challenge financial institutions which are run by legacy technologies.
The market is highly fragmented with various business models being experimented. Regulation, risk and several legacy workflows make the industry in India harder to disrupt.
Having said so, Fin-tech players in the space of payment gateways, automated trading, analytics etc. have tasted a modicum of success with their differentiated offerings. Payment gateways also offering merchant financing is one innovation in terms of business models adopted. Digital bank licenses granted by the Reserve Bank of India (RBI) could be a game changer in the next few years.
Regulated Peer-to-Peer financing and Micro-financing are promising avenues that offer scope for increased participation as no successful players have emerged as yet.
SB:What are the benefits of Open Source Products in Financial Technology?
Kunal:Financial market participants typically use either commercial products, or products built in-house for various technology solutions; which are expensive to build or even acquire from a third party. Maintenance and up-gradation costs are also very expensive.
An Open Source approach that standardizes technology platforms, while providing the flexibility to build differentiated proprietary modules on top, significantly helps in reducing costs across the entire financial services ecosystem. A widespread collaborative environment enhances innovation, improves stability and reduces the transaction costs for all stakeholders, including retail investors who directly or indirectly (through pension funds, insurance etc.) are exposed to the capital markets. And most importantly, Open Source makes the integration of technology, and its adoption by all stakeholders in the value chain faster and economical.
SB: Can you share any statistics on online trading done on mobiles? How safe is it?
Kunal: Since mobile trading was launched in 2010, India has become one of the fastest growing adopters of mobile-based stock trading around the world. High internet penetration, increasing use of smartphones and efficient applications that enable stock trading on these smartphones has led to this phenomenon. On the NSE, the turnover of mobile transactions has increased by 130% over the past year, from Rs 50,800 crore in August 2014 to Rs 116,186 crore in August 2015. We are of the opinion that these figures could even double in the next two years, purely because of the benefits it brings to the trading community.
It seamlessly allows traders to track stock prices and open positions on the go and not constrained by geography or time. It also enables relatively faster execution of trades, besides lesser brokerage charges as well. The quantum of mobile-based transactions could shoot up to nearly 5% of the trading volume from the present 1% if more people from Tier 2 and 3 centers of India join the trading community.
Extremely active traders still use desktops to execute higher trading volumes due to the convenience of multiple screens for purposes of charting, news tracking, accessing disparate markets across geos etc.
Concerns over security are unwarranted as these platforms use the same security protocols adopted by web-based portals. However, it is imperative to have a robust and updated anti-virus software installed, so as to prevent the phone from slowing down and adversely impacting the speed with which opportunities can be spotted and trades being executed.
SB:What are the key points a customer must know while doing online trading?
Kunal: While the user interface of our online trading platforms enables traders to spot market opportunities by customizing the screens as per their choice, essentially the cardinal rule of ‘Safety first’ needs to be adopted. Trading only to the extent to which one is willing to lose and nothing beyond, is of paramount importance. Markets, being prone to volatility and extreme movements, could pose a risk of losses and hence loss mitigation should gain precedence over profit maximization. It is essential to enter ‘Stop Loss’ orders (at a price beyond which a loss is unsustainable) to prevent capital erosion.
In India, traders have the tendency of being emotional with their stock picking and hold on to stocks even when the prices go beyond their ‘Stop Loss’ levels. This is a strict ‘No-No’ while trading.
Traders should also ensure that they wait to see trade confirmation on their trading screen app before they assume that the trade has been done (because sometimes the connectivity may drop between sending the order to the market).
All in all, active monitoring of open positions as well as the profits/ losses made and ensuring that the trades are done within the limits of the cash balance would ensure that one has a stress free trading experience online.
SB:How and where did the idea of uTrade solutions originate? Could you share a brief history of your company?
Kunal:It all started with some meetings I had with stock brokers and bankers in India. I gauged that trading platforms in India were technologically outdated, slow and over-priced. The players operating in this market were a handful. I sensed that all it would take to disrupt the market was a differentiated offering keeping in mind ease of usage, latency and order execution efficiency. Having worked for six years with Lehman Brothers, Nomura and BNP Paribas in London, I had the relevant experience to come up with such a product.
It is with this background that I came back to India in August 2010 and set up uTrade Solutions in July 2011 with my co-founders Harwinder Sidhu, Ashish Grover, and Mayank Mathur, who brought to the table a mix of software knowledge, coupled with investment banking.
Today, uTrade Solutions continues to work towards our mission of ‘Enabling Smarter Trading’, by constantly serving the needs of market participants – primarily on the institutional side. We provide online and mobile trading platforms for retail brokers, algorithmic trading software for institutions and proprietary traders along with comprehensive risk management solutions. We are a team of 50 based in Chandigarh, providing global market access to more than 50 financial institutions in over 10 countries. We facilitate over $10 billion worth of trades on a daily basis today. Our technologically superior multi-asset trading platforms are used by exchanges, proprietary traders, institutional investors and broking firms from ‘Chile to China’ making uTrade Solutions their technology partner of choice.
India remains our key domestic market with 40+ clients of the likes of Bombay Stock Exchange, SMC Global, Tier 1 institutional brokers, proprietary traders, etc.
SB:How unique is your company’s offering?
Kunal:Trading is all about Information processing and Execution Efficiency. Speed is the name of the name of the game. Given our objective to lead innovation in the trading life cycle, we at uTrade take pride in offering the lowest latency of trade execution (10 micro seconds to process an order).
Our unique approach of combining pre-trade analytics with manual and automated trading platforms differentiates us from other trading platforms.
SB:Where do you want to see your company in 2020?
Kunal: With the global fin-tech industry being valued at $50 billion, we envisage uTrade to continue to gain a larger share of this business pie. This can be accomplished by continuing being among the top 3 technology providers for financial markets of India and other emerging economies of the world that we are operating in and looking to expand into. We are wagering on the potential of these markets to provide us the needed impetus to grow.
SB: Please explain your revenue goals and business model
Kunal:By 2020, we are targeting annual revenues of $20m, by maintaining a profit margin of approximately 60%.
We have adopted a subscription license model (charging per user per month) or an enterprise pricing model. We would like to transition to a ‘per trade’ model, as well as an on cloud / SaaS model once there is regulatory approval and client adoption of the same.