In an effort to find an alternative to 'Instant Bloomberg'- the
messaging service that currently dominates trading communications -
several major Wall Street firms led by
The Goldman Sachs Group, Inc.
) are nearing a deal to acquire stake in a chat and instant
messaging startup, Perzo Inc. The report, first published by
Reuters, stated that the investing firms include banks, asset
managers and hedge funds.
These financial institutions - Morgan Stanley (
), JPMorgan Chase & Co. (
), Bank of America Corp. (
), Deutsche Bank AG (
), HSBC Holdings plc (
) and BlackRock, Inc. (
), Maverick Capital Ltd. and Citadel LLC - are contemplating
an investment of $40-50 million in Perzo. Recently, the companies
obtained term sheets for the deal and signed non-disclosure
What Messaging Services Mean for Financial
In the Wall Street forum, messaging applications provide crucial
support in conducting day to day business. An underwriter uses
these applications to share bond price levels with investors, while
hedge fund managers communicate trading ideas. Traders use the
messaging applications for communicating with the sales staff.
What Led to the Latest Move?
A still low interest rate of environment, soft trading volumes,
increased regulatory and compliance costs and higher capital
requirements has limited revenue growth of many financial
institutions like Goldman. Thus, in addition to resorting to
alternative source of revenues, these firms are forced to undertake
cost control measures to drive operational efficiency and
The financial companies have to incur around $20,000 a year for
the messaging service, data, trading and news terminal provided by
Bloomberg LP. Also, Bloomberg customers are unable to buy only the
messaging system. Instead, they have to purchase the entire
terminal. Hence, these banks and institutions have been seeking
alternatives that could enable them to customize services according
to their requirements.
In early 2013, for the purpose of creating an alternative to the
Bloomberg messaging platform, Goldman had launched a project
internally called 'Babel.' However, as the project was initiated,
it came into light that Bloomberg's news division reporters had
access to information on how the bank employees were using their
This revelation led to dissent between Bloomberg and Goldman,
alongside other major financial institutions. Bloomberg in turn
issued a public apology and altered the policy to prevent reporters
from getting access to crucial client data.
The Perzo Benefits
Based in Palo Alto, California, Perzo is startup company founded
by David Gurle. The company's messaging services will be provided
free to its customers. Further, the application is 'open-source,'
which implies that customers can use the application in their
systems and customize it as per requirements.
Will Perzo Be a Good Alternative to Bloomberg?
Being a dominant player in the market, Bloomberg's chat service
currently has a huge user base of as many as 320,000. Hence,
financial institutions resorting to an alternative messaging
platform like Perzo may face some challenges at the initial
As electronic medium has replaced manual trading, there has been
growing concern regarding the safety of keeping crucial data. A
heavily and importantly used messaging system must be secure enough
to achieve success and replace an existing player.
Market is not very confident about the impact of replacing
'Instant Bloomberg' on Goldman's orders for Bloomberg
terminals. Also, it is not known yet whether Goldman would
continue Bloomberg's messaging system simultaneously with the new
However, with the major financial companies investing in Perzo,
it seems that Goldman will benefit from the messaging service as
there will be a number of customers using the new system.
Goldman currently holds a Zacks Rank #2 (Buy).
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