Goldman Sachs Group Inc. has bought a $20.5 million stake in Perseus, a technology company that provides high-frequency trading firms with the networks they need to do business.
“The investment by Goldman Sachs is an important accelerator of our business,” Perseus Chief Executive Officer Jock Percy said in a statement on Tuesday.
HFT firms need the fastest available technology because many of their trading strategies rely on speed. Trading firms often pay to keep their computers in or near the data centers that house the systems used by stock exchanges and other venues. The speed at which an HFT firm can send an order to a trading venue can determine whether the transaction is profitable.
Perseus is among the handful of companies that transmit data between exchanges using microwave towers. While Perseus began by servicing HFT firms, it now counts gaming and media companies, exchange operators and banks among its clients. The Goldman investment will help accelerate Perseus’s roll out of services to 25 new locations, Percy said.
“We had our origins in that HFT market-making space,” Percy said. “That’s been good for our DNA. It’s taught us how to look after some of the most challenging customers and how to solve the most difficult problems.”
The most sophisticated HFT firms are finding that the do-it-yourself approach to networks has become too expensive, Percy said. That has created an opening for companies such as Perseus to provide firms with almost everything they need to trade except for the algorithms themselves.
KCG Holdings Inc., a brokerage with roots in high-frequency trading, teamed up with another company in February to sell access to their combined microwave-tower network to other HFT traders.
“We see a great opportunity in the financial technology sector in general, and Perseus in particular,” said Terry Doherty, a vice president in the securities division at Goldman. “They have the potential to dramatically shift the way that the global markets engage by introducing the fastest and most secure managed services the industry has ever seen.”