Spark Systems – pioneering the creation of a Singapore - based foreign exchange marketplace

Spark Systems is a Singapore-based financial technology company that provides innovative solutions for foreign exchange trading across Asia. The company connects buyers and sellers under one platform, and aims to make FX trading in Singapore cheaper and faster for institutional investors. To find out more, e-Forex spoke with the four founders of the firm who are all industry veterans with deep domain knowledge in Finance, FX Trading, Technology and Software Engineering.

Jason Lee Wing Hin COO - Internal Engineering | Wong Joo Seng Founder & CEO | Ye Ting Song Chief Technology Officer | Jason Wang Kee Huat COO - External Connectivity
Jason Lee Wing Hin COO - Internal Engineering | Wong Joo Seng Founder & CEO | Ye Ting Song Chief Technology Officer | Jason Wang Kee Huat COO - External Connectivity

Wong Joo Seng (WJS): Mr Wong, you are CEO of Spark Systems. When was the firm established and what long term objectives do you and your colleagues have for it?

Spark Systems Private Ltd was incorporated 26 April 2016. In those early days the objective was to distil a clear picture of what the company’s aims and focus ought to be. The key to me as the CEO is to ensure the company gets the ‘narrative’ right. That means being crystal clear about the ‘pain point’ i.e. the problem the industry is facing and hence offer a precise solution to resolve it. To me there is clearly a problem in the platform and exchange space in FX. Many of the incumbents have ageing core engines circa a decade old or more. These are old, slow and costly to run for users as well. Spark Systems is looking to develop brand new platforms with cutting-edge technology that are better, faster and less costly. Our long-term aim is to grow with our clients, ensure they have an enduring technological edge in the activities they engage in because they partnered with us. Spark Systems is building next generation trading systems with Artificial Intelligence powered by Complex Event Processing (CEP) to understand market conditions primarily around volatility and liquidity. 

WJS: What do your own day to day responsibilities usually involve?

My day to day responsibilities range widely from both micro to macro issues. From operational concerns of staffing, Human Resources, office admin and logistics to business development, targets and strategy for both the business as well as partnerships with venture capital and strategic investors. I am fortunate to have a team of three co-founders who are all deeply entrenched in their own domains like IT/Tech, internal Operations as well as external connectivity. 

We are technologists at heart and are always on the lookout for new technology trends and new ideas.
We are technologists at heart and are always on the lookout for new technology trends and new ideas. 

WJS: What do you see as the key challenge facing the FX market today?

The key challenge in the FX industry today is that organisations engaged in it such as banks, hedge funds, corporate treasuries and other market users and eco system providers are intent on doing more with a great deal less resources. Margins are now razor thin in the industry; staffing by way of headcount has also been reduced, drastically in some cases. They all see their respective roles clearly and want to fulfil that vision with minimal spending and yet without compromise. 

Jason Wang (JW): Mr Wang, you are COO of External Connectivity at the firm. Please tell us a little more about that and what’s involved.
Spark is looking to build an ecosystem, which includes Liquidity Providers (LPs) and our Clients. This is a delicate job as both sides have differing agendas. The Buyside is looking to trade on the tightest and best liquidity. Providers want the clients to trade with them exclusively, and to increase yield. As a platform provider, we sit directly in the middle. With better technology, we want to be in the position to propose solutions to meet the needs of both sides and to be able to make both LPs and Clients happy. With happy clients and happy LPs, the ecosystem would then be able to flourish.

A typical week would include running through trades and execution reports with the client traders, discussions with Liquidity Providers, follow up with prospects, looking at our marketing efforts, and also getting involved internally to shape our product. It’s never a boring moment!

JW: What range of products and services does Spark Systems currently offer and what types of clients are you providing solutions for?

Our basic product offering would be our FX trading aggregator for Spot, Forwards and Swaps. What we are currently working on, includes a mobile offering, Algo Order Types, Improved TCA and MIS reporting, a Pricing and Risk Engine, as well as white label. We are targeting Hedge Funds, Banks, Corporate Treasuries and the general buyside community.

JW: Spark Systems aims to develop a Singapore-based FX marketplace by building private platforms and linking them to create a network. How many of these platforms will be required to achieve critical mass and what’s involved with interconnecting them all together?

It’s very hard to determine the magic number, as to how many clients would create this critical mass. If you were to ask me to put a number, my guess would be around 12-15 sizeable clients, that would do over 5 yards a month. For the ecosystem to work, we would need to put in place a clearing solution, to allow the clients to trade with one another. Also, technology wise, we have already put in place the necessary foundation to allow client to client interconnectivity, if they’re using the Spark System platform. Like many other start-ups today, that focus on Peer-to-peer, our marketplace would be no different. Our approach is to be client-focused, which will in turn, help grow our community naturally.  

Ye Ting Song (YTS): Mr Ye what does your job as Chief Technology Officer at Spark Systems involve?

As Spark CTO I am responsible for product development as well as the technology direction of the company. This involves overall system architecture design, and hands on solutioning and prototyping new product features and as well as client customizations.

I am also directly involved in hiring, managing and coaching our development team. Our development team grew from the very first employee to now eleven strong, and still growing. I’m very proud that we managed to build the team completely from ground up, a group of like-minded and motivated technologists, from experienced hires to talented developers without any prior FX experience, producing some of the best, original, and world-class technology here in Singapore.

Singapore is the third largest FX centre in the world but has no matching capability so buyers and sellers are currently only being matched in London, New York and Tokyo.
Singapore is the third largest FX centre in the world but has no matching capability so buyers and sellers are currently only being matched in London, New York and Tokyo. 

YTS: How challenging is it to develop a brand new FX trading platform from the ground up so that it has all the required attributes clients are looking for in terms of speed, resilience, low latency and cost efficiency?

I started the core development of our trade engine in 2015, well before the official incarnation of Spark System as a company. The original prototype was built based on my years of experience working in the e-FX trading desk of global investment banks as well as systematic FX hedge funds. But this was only the first step of a much longer journey.

We always knew we had a technology advantage since the FX platform business for years was under invested, some of the previous generation trading platforms built years ago are still being widely used today. However, turning our super capable, technologically advanced prototype into a full featured, professionally looking, robust and battle tested trading power platform was no easy task. So, it took us a while to catch up and develop the full feature set expected by the industry, and it took us time to build the team and fine tune the engineering process in order to be agile, to deliver frequent feature updates, and at the same time remain robust, providing a trouble-free trading experience.

For example, we took time to build a whole new support application on top of our existing trading applications to help us better manage and streamline the release and deployment of the hundreds of trading applications we host and run on behalf of for our clients.
YTS: In what ways is Spark Systems utilising next generation technology to support your products and services?

We aim to build the next generation FX trading platform using what the latest bleeding edge technology can offer. For example, our trading GUI is built using the latest Java GUI framework: JavaFX technology. Our server-side trading engine has the following unique, proprietary technologies built from scratch:

Lightning messaging is our internal byte level messaging protocol, it provides consistently better low latency performance (<100 μs) and allow us to consume more price updates, which directly translates to extremely low rejection ratio (< 2%) and reliable performance under volatile market conditions.

Our Tick Database allows us to store tick by tick, per millisecond price updates with full book depth. The ability to deal with vast amount of data, being able to process millions of price ticks in under a few tens of seconds, gives us the ability to play back historical prices and perform statistical analysis, and therefore give true transparency to trading performance, of which never seen before in other trading platforms.

Our complex event processing engine (CEP) is an event driven dependency graph calculation framework that is designed to work with both historical and real-time data, capable of processing millions of events per seconds. Moreover, with its dedicated deployment / launch and class container framework, it separates the concern of building algo strategies from managing the undying trading engine. Similar to applications running in iPhones, CEP gives the ability to run versatile trading strategies on trading engines. Our smart order routing algo and our price making algo which is part of our pricing engine product offering, are both built using the CEP technology.

Jason Lee (JL): Mr Lee you are COO of Internal Connectivity within the firm. Is your work mainly focused around process management, technology deployment or a mixture of both?

It’s a mixture of both and more. Process management and technology deployment are intertwined. They can’t be separated. A technology start-up looking to outpace its competitors from conception to development to deployment to user adoption must be disciplined in its process, forward looking in its deployment and proactive in reaching out to its clients.
 
Besides the two areas of focus, a lot of time is also spent on finding the right people for the job. Training and working with the current team to improve synergy and to find ways to be better. People management is probably the other main focus of my work.

Whatever products and services we may be providing to our clients, what every company is really selling is ‘user experience’
Whatever products and services we may be providing to our clients, what every company is really selling is ‘user experience’

JL: Spark Systems seeks to bridge the gap between product offerings and actual user needs. In what ways does acting as a middleman allow the firm to play a facilitative role between liquidity providers and takers?

In an aggregator, liquidity providers (LPs) do not get to see how the flow is being distributed and often takers don’t have time to speak to all of them. Spark Systems see’s this gap as an opportunity to:

  • Analyse the trading patterns
  • Identify potential opportunities, ideas and strategies
  • Regularly communicate with both sides
  • Implement ideas that are appealing to both

Whilst one might think that such an approach would only come up with one-sided ideas (favouring the LP or the taker), it often is not the case. Often, with Spark Systems being able to provide insights based on the trading patterns of the client and the liquidity flow of the LP, the continuous dialog becomes highly insightful and productive. Which, in turn, has resulted in new features being implemented in the product.
In doing so, Spark Systems has found that it is able to make trading more efficient and transparent to both the LPs and the takers. The benefits of such efficiency and transparency are tremendous.

Spark Systems believes in the excellence of execution and that takes priority over all else.
Spark Systems believes in the excellence of execution and that takes priority over all else.

JL: Many FX trading firms are burdened with legacy technologies and trading systems. How does Spark Systems help them to solve these when deploying your own solutions?

Spark Systems has the advantage of not having the burden of legacy technologies and actively looks ahead to improve its competitive advantage. Rather than looking at replacing the entire stack, which is often too big of a change for most companies to swallow, Spark looks to augment current systems of its clients to achieve a better, faster and smoother trading experience. In doing so, clients spend more time on trading instead of the trading process. Thus, integration at various levels becomes Spark System’s competitive advantage as it not only solves the trading firm’s legacy issues, it also enables the trades to be done on Spark System’s platform.

Furthermore, a highly open and scalable architecture, coupled with an energetic team with the FX know-how and development chops, creates solutions that helps FX trading firms move forward whilst being backward compatible.

WJS: Singapore is the world’s third largest FX trading hub - after London and New York. What makes the City State so strategically important for your business model and how much support have you had from regional players?

Singapore is the third largest FX centre in the world. 1/8th of global FX volumes originate from within the island’s shores. That’s 12.5%. However, despite this there is no matching capability in Singapore so buyers and sellers are currently only being matched in London, New York and Tokyo. On an island where more than 10,000 corporate treasuries are based and where almost every major global bank has an office or branch, we are still sending all our orders to London, New York and Tokyo. On the fastest low latency fibre optics, it takes about 170ms to send an order to London or New York from Singapore and it takes a similar 170ms return to the indicated the success (or failure) of the fill. That’s a 340ms round turn. To Tokyo it’s takes about 160ms (round turn). Spark intends to match trades in Singapore. 

To build matching engines housed in data centres here would mean this process can be drastically reduced to just 1 or 2ms for users based in the country and less than 50ms round turn for users based in the regional countries of Malaysia, Indonesia, Philippines, Thailand, etc. This would be a great boost to FX market users in the region and hence a natural conclusion system-design wise. This means accelerating rejection ratios, currently experienced by market users especially during volatile, low liquidity conditions in the market place, would be largely attenuated. This represents not just an improvement but one of several orders of magnitude from what’s currently possible today. This is achievable only with clear and precise thinking aimed at gaining a proper understanding of the problem/s at hand. 

Spark Systems as a grant recipient of The Monetary Authority of Singapore is working hand in hand with it towards this end; to develop Singapore as an FX matching centre. The progress to date, in just under two years has been nothing short of phenomenal!

JW: Will you be making your platform and technology solutions available to other firms via a white labelled or similar solution?

Yes, we do have a white label offering for our platform, which features our Pricing Engine and Risk / Auto-hedging offering. As a young start-up, we are also keen to explore potential partnerships with other technology or client firms, as long as our goals are aligned, and we are able to, as a result, build a better product offering.

YTS: How have you gone about trying to future proof your technology and system architecture to ensure it remains state of the art?

We are technologists at heart and are always on the lookout for new technology trends and new ideas. Spark’s overall system architecture promotes loose coupling as a design principle and therefore is agile and adoptive to changes from technology advances.
However, our true secret weapon for future proofing our platform is our CEP technology. Because unlike most other trading platforms which are closed systems, purposely built but hard to change and adopt for a new purpose, the Spark Trading Engine armed with CEP technology is an open system that allows continuing building, improving and evolving new trading strategies via deploying them into CEP. 

Consider the difference between building phone apps for the old style Nokia phones vs building apps for the iPhone, CEP provides truly versatile ground for building multipurpose trading strategies, it is what allow us today to turn a buy side trading platform armed with a smart order routing algo, into a price making engine for a retail broker or a local bank, by simply deploying pricing strategies into the CEP, all running under the same core Spark Trading Engine.

We believe it is a truly innovative technology that will allow us to be adaptable to the ever-changing market condition by continue to build algos, trading strategies that will help both Spark and our clients to remain relevant.

JL: What steps has Spark Systems been taking to seek out and partner with other leading technology vendors and trading system enablers who can deliver the additional services you will need as you build out your offering?

Spark Systems separates its core offerings, which it views as its competitive advantages from everything else. In seeking a partner to complement its offering, Spark System first does its research to shortlist its potential partners and once that is done, it comes down to the following three factors:

  • RFPs – An RFP is not a one-way street. Spark Systems expects the partner to do as much research on us as we do on them. Such effort builds a strong case on the partner’s commitment to a project.Besides the background work, an open and transparent communication channel on deliverables, timelines and budget is key. A strong two-dialog helps us to determine the credibility and experience of the partner. Saying yes to everything is often a sign of overpromising.
  • Testimonies and References – A true long-term partner is one that can work through the problems with you. With complex systems, such partners are crucial. Having a reference speaks volumes of the partner’s commitment to its clients and should never be overlooked.
  • Proof of Concept – The ability to work on a small test case is important to determine the strength of the product and the ability to implement. Partners who are willing to take that one step further to work with us often end up having a long-term relationship with Spark Systems.

It should be noted that contrary to popular belief, the lowest price doesn’t necessarily win the deal. Spark Systems believes in the excellence of execution and that takes priority over all else. When a partner can do that with us, that relationship goes a long way.
 
WJS: What plans do you have for growing the business further over the next year or so?

There are no shortcuts to growing a business. This is the third business I have started up. In my first I was founding CEO of GK Goh Financial Services Pte Ltd the wholly owned derivative trading subsidiary of the GK Goh Group of companies based in in Singapore. This grew to be one of the largest FX trading operations in Asia. I started that in 1998, before Fintech and Start-up even became buzz words!
As for my second company, I was founding chairman of M-DAQ Pte Ltd. That was in 2010.

To me after all the hype and the conceptualising and capital/fund raising of a new company, the focus has to be on traction and real growth. Our obsession, if any, is solely about on-boarding clients and growing volumes. In a word, traction. The aim is to do more of the same in the coming 12-24 months and become a force to be reckoned with in the industry by serving our clients better. It’s always been clear to me that whatever industry we may think we are in and whatever products and services we may be providing to our clients, what every company is really selling is ‘user experience’. To that end, Spark Systems aim is to ensure we deliver the best possible user experience in the industry to our clients.  

JW: What’s the easiest way for firms to learn more about Spark Systems and the services it offers?

My team and I are always available 24hrs, 5.5 days a week. Just like the FX Market. Please feel free to reach out through our website, on via linked in, or simply drop me an email to: jason.wang@sparksystems.sg