When Gain Capital first opened for business in 1999, the Bedminster, N.J.-based company was practically alone in its field, providing direct retail access to the global foreign exchange market for as many as 100 customers a day. Today - with competition from the likes of FXall, Currenex and Lava Trading - Gain Capital routinely processes hundreds of thousands of trades for thousands of customers a day.
The firm has grown to a 400-employee global online organization with several trading platforms, reaching traders in more than 140 countries who transact nearly $250 billion each month. The privately held company does not routinely report revenue but disclosed annual revenue of approximately $200 million in its 2008 IPO filing with the SEC.
According to CIO Andrew Haines, Gain Capital faces what can be described as a "good problem to have" - how to retain the innovation, speed and enthusiasm of an Internet start-up, while overlaying the reliability, robustness and process optimization of a full-scale financial firm? This is the challenge that occupies Haines, and the journey toward solving the problem, he relates, is happening along two investment tracks: technology and people/process.
Building a Solid Technology Foundation
As a start-up at the height of the Internet boom, having the ability to handle 100 customers logged in concurrently and perform 1,000 trades a day was considered "phenomenal," remarks Haines, who joined Gain Capital in 2005. But as the company's trade volume and corresponding revenue grew 80 percent per year, he says, it became clear that he would be spending a lot of time beefing up the software and hardware supporting the operation.
"You can always throw more hardware at it - that gives you a 20 percent improvement," Haines says. "But I needed a twentyfold improvement."
According to Haines, one of his most significant moves, completed in early 2009, was to implement an enterprise messaging system (EMS) bus from Tibco Software. The bus has vastly improved the firm's ability to operate smoothly during spikes - such as economic events that can drive 30 percent of the firm's volume for a day in the span of two minutes - as well as to develop new products, he reports. To compete against the biggest firms on Wall Street, Haines also directed the company's move from "10 servers in a closet" to a distributed network that shares real estate at top-tier third-party hosting centers, which facilitates faster connections and calculations, he says.
In addition, Haines has driven Gain Capital's delve into complex event processing. CEP typically is a hardware-based, low-latency solution that processes many events occurring across multiple layers of an organization, identifying the most meaningful events within the event cloud, analyzing their impact and taking subsequent action in real time. In late 2009 Haines hitched a CEP platform from StreamBase to the Tibco bus, which then links to the firm's matching engines and web servers. The CEP system, he asserts, has wide implications for the firm.
"We needed a solid foundation before searching for enlightenment," Haines says, referring to the firm's investment in CEP and the EMS. Using CEP has resulted in faster development cycles, tighter foreign exchange spreads and better market making, he reports. But it also will help Gain with many internal improvements that are not as obvious to customers, including real-time risk management, profit-and-loss reporting, position management and information security, he adds.
"Going forward, I see a lot of potential in using CEP for real-time analytics," Haines comments. "Foreign exchange is a 24x5 business. If we can [implement computing power that lets us] know every second how we are doing, we can take that model and apply it across all of our disciplines. And we can apply real-time analytics to our entire operations - not just trading." CEP also can help Gain provide better customer service, Haines contends, including detecting fraudulent activity and progressing anomaly reports to live compliance officers, a process that can take weeks using conventional auditing techniques, he says.
The Right People Driving the Right Processes
The hiring of Haines and Al Oakes, VP of the firm's GTX FX trading platform for hedge funds, high-frequency traders and other professional traders, is a reflection of Gain Capital's transition from a start-up to a midsize firm with king-size competition. Haines and Oakes have experience at both start-ups and big banks. Haines was VP and senior program manager of debt trading development for Merrill Lynch and an assistant VP and project manager at Smith Barney, at a time when both firms were making major investments in broker workstations. In 2002 he founded Arch Technology Group, a technology management consulting firm. Oakes joined Gain from security-management company LifeLock, and before that, Societe Generale.
There is no set technology budget, as Gain Capital's IT approach is project- and needs-based, Haines reveals. But approximately 10 percent of the company's revenue typically is devoted to technology, he says. About 60 people work in IT across Gain Capital's seven global offices, with the majority based in Bedminster.
"As the team grows and the organization becomes more mature, I need people to wear two hats," Haines says. "On the one hand, they need to be in start-up mode, where the pace is very rapid and we go from concept to implementation in a matter of days and weeks. But also, they need to know how to implement best practices and run a managed organization, and really have some skills that are typically developed in larger organizations."
Not a surprise for a technology-dependent company, Haines' management approach is largely process-based. Gain Capital increasingly is using the agile development method, which encourages a disciplined project management process that encourages frequent inspection and adaptation, but which is team-oriented and adaptable, according to Haines. "Pace is really critical to our success," he says.
"In the cowboy days, the CEO would request a change, and we'd have it up in a day or two," Haines continues. "Now we take a more measured approach so that we don't unnecessarily create risk for the business. We often look at our changes and say, 'We could spend three months in QA [quality assurance], but we really want this feature in production.' If it doesn't work, we can address it quickly in production. We just have to acknowledge the risk of falling over and assess whether that represents a greater risk to the business than the delay in time to market that goes with implementing a stricter QA cycle."
Haines has some help from Team Foundation Server, a Microsoft product that manages the software development process, from bug and defect tracking to new-feature initiation. TFS embodies the principles of agile development and other methodologies that have been adapted by Microsoft and released as the Microsoft Solutions Framework. The product is linked directly to the Visual Studio development tool that creates Gain's trading platforms.
Using the agile method has helped Gain Capital improve its definition of roles, responsibilities, key deliverables and milestones in a project, Haines notes. "Projects don't fail in the last two weeks," he says. "They typically fail in the first two weeks - you just didn't know it.
"We are trying to ensure that we understand what the goal is and what success looks like early in the process and make sure we have a good business partner to manage it with us. We are in constant dialogue to confirm our approach and set priorities; we're always choosing one project over another. Even though we are always multitasking, we only have so much capacity. We tend to get very aggressive on our goals and try not to be disappointed when we slip a little bit. But we'd much rather have that happen than miss a market opportunity."
Adopting agile development methods, investing heavily in heavy-duty messaging and CEP systems, and hiring technology personnel who have the right mix of experience in small and large firms has helped Haines ready Gain Capital for its next decade of innovation. He reports that his next target market is the controversial high-frequency trader.
"A lot of other FX providers have fear of [the high-frequency trader] market," Haines says. "But rather than keep them away, we are looking it directly in the eye and attempting to cater to it."
The cowboy days may be over at Gain Capital, but in today's market, even the most disciplined army still needs a quick draw and a cool head. Haines and his team seem to embody both of those qualities.