MerQube raises more funding bringing Silicon Valley tech to index production
A new index provider, MerQube, has just gone through its Series A funding round led by J.P. Morgan.
The funding brings together the venture investing firm, ThirdStream Partners, hedge fund managers Benjamin Smith and Sheehan Maduraperuma, co-founders of Laurion Capital Management, and several other seasoned financial market professionals. MerQube has previously raised USD 2 million in its seed rounds in August 2019 and October 2020, with historical investors.
Vinit Srivastava, CEO at MerQube, explains that the firm launched in July 2019, after Srivastava had left S&P Dow Jones Indices. His original background was in the Silicon Valley, in engineering.
“The idea for MerQube came from my work at S&P where passive continues to grow and is more customised and complex but the platforms and technology that are used to run and design these indices were pretty much designed back in the early 2000s.
“I felt there was a need to have an offering that married the broad technology of today to the world of indexing,” he says.
Praveen Yalagandula, co-founder and CTO at the firm, and Keith Loggie, co-founder and COO, have also come from an indexing and technology background.
MerQube is set on disrupting the indexing industry. “Most of the players are recognising that there is a need for automation and flexible platforms where new products can be built,” Srivastava says.
“Some of the legacy providers can take an inordinate amount of time to get those products to market and the advantage of a tech-based platform is the time to market is much faster, and then the tech allows us to ensure there are fewer errors.”
Srivastava says that this is a space which has been underserved by technology. “It’s one of the areas of finance where technology didn’t come to the fore.
“The 2021 technology with a Silicon Valley approach with new data sets make them more available to create new strategies and has become much quicker. If clients want to launch 50 indices, they can do it much faster with our platform.”
The firm is also able to offer derivatives and options functionality, something that formerly could only be done within banks.
Commenting on the new trend for self-indexing, he says that people are sometimes trying to self-index because they want to retain their IP in active products, uncomfortable with sharing that with a third party or an index provider.
“Regulators don’t view this well for good reasons,” he says. “There has to be an arm’s length approach between product and index provider. An interesting commercial model would be one in which clients can still own their IP and would only pay for a platform to execute it.”
The new offering will not at this point include fixed income because, the firm says, there are limited sources of pricing for fixed income.