November 5, 2019

Carlyle Buys Tracking Software Firm on the Heels of UBS Trading Scandal

The NYC-based Carlyle Group is buying a tracking software firm on the heels of a UBS trading scandal.

Carlyle buys tracking software firm on the heels of UBS trading scandal, reports Maija Palmer at The Financial Times. The software company, ITRS, provides trading firms with oversight of its trades and risk management. The Carlyle Group is a private equity firm with $153 billion under management. Aside from purchasing companies, the firm also has fund of hedge fund services.

While the ITRS deal amounts to a relatively small acquisition, the software is used by eight out of the top 10 global investment banks, as well as hedge funds and brokers to monitor the risks they are exposed to in real-time when taking intra-day positions across multiple asset classes and exchanges and trading venues.
It is understood the purchase, made in the wake of the trading scandal that has rocked UBS, valued the 14-year-old company at about £50m. In the year to the end of March, ITRS had revenues of about £16m, up from £11.8m in 2009.
The company has been growing rapidly over the past few years, thanks to a need by investment banks to improve their trading floor efficiency and because of regulation that requires them to keep a better eye on their risk profile.
Regulators are concerned that often large positions could pose new types of risk to the financial system, as few participants have the ability to monitor the full effect of their positions, in real-time, throughout the day.
“In 20 years’ time most human traders will have been replaced by trading algorithms and we will need robust monitoring systems for them,” said Fernando Chueca, partner at Carlyle.
The growth of high-frequency and automated trading, as well as legislation such as the US Dodd-Frank act, which will push more transactions on to electronic platforms, is set to further raise the levels of data that need to be monitored.
In the wake of events, such as those at UBS, there is an increasing interest in technology that can spot anomalies. “There will not be one single solution to solve the problem,” said Mr Chueca. “All banks will have to look at strengthening every single point of the chain.”
Carlyle has taken a majority stake in the company, while the founders have reinvested in the business. ITRS was founded by Stephen Bates, a former salesman at Reuters and Misys and Misha Kipnis, a software engineer.

This is a strong, swift play by a company who has capital to put to work. When Carlyle buys tracking software firm on the heels of UBS trading scandal, it represents a smart decision to notice opportunity in the changing world events.


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