Update: Symphony, as of Wednesday, is under investigation by the New York State Department of Financial Services for offering services similar to those that were used in previous schemes involving interest rate and foreign exchange interest rate manipulation. Here’s the company’s response to the state’s chief financial regulatory body: “Symphony is built on a foundation of security, compliance and privacy features that were built to enable our financial services and enterprise customers to meet their regulatory requirements. We look forward to explaining the various aspects of our communications platform to The New York Department of Financial Services.”
The idea of a symphony is that multiple musicians work together to create a big melodious, whole.
Hoping to run with that idea is the Palo Alto, California startup Symphony. After less than a year in business, the company is bringing new technology to a pretty niche field in the world of investment banking and sparring with financial industry heavyweights in the process.
Symphony offers an instant messaging tool and relevant content to traders and others involved in the equities and bond markets, who must frequently communicate with each other on the floor, in the back office, and potentially with other traders throughout the world.
The 800-pound gorilla to contend with is Bloomberg, whose competing product is Instant Bloomberg, called colloquially the Chat. Others include Thomson Reuters, whose product Eikon also contains messaging and content functions. Yahoo Messenger and AOL messenger have also had smaller parts to play here, as have some other startups, such as Markit, whose networking platform Symphony purchased last year.
But Symphony, founded by chief executive David Gurle, adds something new. First off, it’s dramatically cheaper than competitors such as Bloomberg, which charges upwards of $20,000 annually for one if its terminals. By contrast, Symphony has a free product and charges up to $30 per seat for enterprise users.
“The platform integrates the different forms of communication and content you create, share and connect with,” Gurle says.
It also integrates seamlessly with users’ contacts, and acts as verification point while using encrypted keys to lock down communications between two parties, giving an added assurance to traders that they are corresponding with people verified in their various networks.
That last point is particularly important in an era of high-profile corporate hack attacks, affecting banks such as JP Morgan Chase, and Sony Pictures, where hackers made off with a trove of emails and content vital to the entertainment company.
Meanwhile, Symphony can also connect other layers in a trading operation that are typically left out of the loop, such as back-office and middle-office workers, who can play an important role in longer-term trades, experts said. What’s more, it scans all of the messages for compliance red flags and archives them, two important considerations, as instant messages have been implicated in recent price fixing scandals around LIBOR.
Gurle brings more than 20 years of experience to Symphony, founding a predecessor company called Perzo in 2012, which he merged into the current concern. Previously, he worked developing messaging tools and applications for Microsoft, Skype and Thomson Reuters.
A Warm Reception
And that experience has helped Gurle round up $66 million in funding from 15 heavy-hitting investment banks, including Goldman Sachs, JP Morgan Chase, Morgan Stanley, Bank of America Merrill Lynch and BlackRock. These companies are all Symphony customers in a beta trial currently under way.
Financial services analysts are bullish on Symphony for the most part. As a standalone product dedicated to financial professionals, it has advantages over the products offered by Reuters and Bloomberg, whose chat products have grown out of their information services businesses, and in Bloomberg’s case, its lucrative terminal business.
“Bloomberg is tied to content, and what is driving them is to move Bloomberg content,” says Robert Enderle, principal analyst for Enderle Group in Bend, Oregon.
(A Bloomberg spokesperson declined to comment, but provided information that said Bloomberg’s clients exchange 200 million messages and engage in 15 to 20 million chats daily on its platform.)
By contrast, and thanks to Symphony’s design and the encryption of messages, Symphony has no insight into the specific content its users are sharing, financial analysts say. And since it doesn't own the content its users share, unlike more established competitors, it is potentially more neutral.
But there are challenges too, such as convincing traders to add the new product to their already crowded communications toolkits, financial experts say.
“To add something new to screen real estate is the biggest hurdle for Symphony to overcome,” says David Weiss, a senior analyst for Aite Group, a research firm based in Boston.
Gurle says he’s confident he can overcome that hurdle, in part through the backing of Symphony’s investment bank partners, which he says gives the company a significant advantage.
“Our customers and investors are high profile, and have a strong commitment to take the product across their user base,” Gurle says.