Cinnober Financial Technology

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Cinnober Financial Technology
Founded	1998
Headquarters	Kungsgatan 36, SE-111 35 Stockholm, Sweden
Key People	Peter Lenardos, CEO
Employees	250+
Products	Exchange platforms, risk and clearing technology, market surveillance and compliance systems
Twitter	@Cinnober
LinkedIn	Profile
Facebook	Page
Website	www.cinnober.com
Releases	Company News

Cinnober Financial Technology was a global provider of financial technology, primarily to exchanges and clearinghouses, that was acquired by Nasdaq. The acquisition was completed in January 2019 for $220 million, up from Nasdaq's original bid of $190 million in September 2018.

After the acquisition, Nasdaq folded Cinnober into its Market Technology section, effectively retiring the former company's identity.

Headquartered in Stockholm, the company focused on developing trading and clearing technology, identifying new trading trends and assisting companies with evolving regulations.

The trading and clearing technology was based on Cinnober’s TRADExpress platform, which included price discovery, order matching, market data, and market surveillance. Cinnober's customers included major players in the financial industry such as: the OCC, Australian Stock Exchange, Dubai Gold & Commodities Exchange, London Metal Exchange and Stock Exchange of Thailand.

As a provider of real-time clearing systems, Cinnober was engaged in projects with: BM&FBOVESPA, Dubai Gold & Commodities Exchange (DGCX), the Japan Exchange Group (JPX), the Johannesburg Stock Exchange (JSE), and the London Metal Exchange's clearinghouse LME Clear.

Cinnober developed technology platforms for Alpha Trading Systems (now (TMX Alpha), Borsa Italiana, Burgundy, Cboe, Deutsche Bank, Deutsche Boerse, Quadriserv, and Turquoise.

Cinnober's subsidiary, Simplitium, provided a trade reporting service for OTC trades for large institutions. Simplitium partnered with the London Stock Exchange Group, offering a trade reporting service called TRADEcho for MiFID II-compliant reporting for firms. Simplitium also offered a catastrophe risk modelling platform for the insurance and re-insurance sector.

Cinnober had more than 250 employees, with more than 30 nationalities represented, most of whom had a background in marketplaces and financial IT. Offices are located in Stockholm, Umeå, and London. Its shares are listed on the Nasdaq First North market in Stockholm.

Background

The company was founded in 1998 by four former employees with experience in developing trading systems at such places as OMX and Swedish bank SEB. They had worked together during the 1980s at Digital Equipment Corporation and wanted to build a flexible and fast platform for financial transactions.

The four founders, Pär Bertilsson, Peter Lenti, Gunnar Mjöberg, and Gunnar Lindell, its first CEO, were joined in 2000 by the then-chairman of the board, Nils-Robert Persson, who is the largest stakeholder in the company with a 15.1 percent stake.

In September 2018, Nasdaq said it planned to buy Cinnober in a deal valuing the business at around 1.7 billion crowns ($190 million). It later upped that to $220 million which more than 90 percent of Cinnober's shareholders accepted.

The Early Years

The company's early technology was focused largely on providing trading systems for exchanges. The American Stock Exchange (AMEX) became a customer in 2000 when it ordered a trading system for the marketplace’s specialists and market makers. Cinnober’s relationship with AMEX was further solidified in 2002 when the exchange extended its order for a complete electronic trading system, fully based on the TRADExpress technology. The same year, The London Metal Exchange (LME) joined Cinnober’s growing customer base when it implemented its first version of the LME Select trading system, using Cinnober's TRADExpress platform.

In July 2002, the company launched CScreen, a Java-based system for wholesale brokers and traders in the equity options market, which allowed participants to broadcast and negotiate prices in real time. In April 2005, Cinnober sold CScreen Ltd., a subsidiary of the company, to Euronext.liffe, enabling that exchange to offer straight-through-processing, from pre-trade price discovery to post-trade booking and administration.

Cinnober moved into the clearing space in 2005 when it provided the London International Financial Futures Exchange with the technology behind Liffe's Bclear, the first platform to handle processing and clearing of credit default swaps, which at the time were cleared through LCH.Clearnet. That relationship was extended in 2008 when Liffe, then part of NYSE Euronext, added commodities to the platform.

In 2006, Cinnober purchased a 50 percent stake in Cinetics Ltd, allowing Cinnober to expand its product suite to include trading of non-standardized contracts. In March 2016, it also forged a deal with the Chicago Board Options Exchange to provide the exchange with the first fully-automated electronic FLEX Options trading system in the U.S.

Cinnober Goes Global & Builds a BOAT

Cinnober expanded rapidly thereafter with several deals including Alpha Trading Systems, Turquoise, Quadriserv, Hong Kong Mercantile Exchange and Burgundy, a Nordic-based multilateral trading facility.

In 2007, Cinnober developed a pre-and post-trade reporting system for Project BOAT, with a group of nine investment banks whose members overlapped with Turquoise. The platform enabled firms to meet requirements for pre-trade and post-trade reporting obligations for European OTC equity trades. The banks sold their stake to data vendor Markit, which operated the equity trade reporting platform as Markit BOAT, in January 2008. Markit, which was set to close down the European trade reporting service, sold the entity in July 2014 to Cinnober, which saw value and demand for independent trade reporting. In 2015, the firm changed the name to Boat Services Ltd. and implemented a long-term strategy to include international banks. The company offers the service to banks that are required to report OTC transactions beyond equities as a part of MIFID II. Cinnober partnered with the London Stock Exchange in September 2015 to offer a comprehensive, shared reporting service, which is based on MIFID II trade reporting requirements.

In June 2016 Boat and the London Stock Exchange jointly launched TRADEcho, a pan-European trade reporting service for all asset classes covered by MiFID II for OTC and on-exchange products (including equities, fixed income, depository receipts, ETFs, derivatives and commodities). TRADEcho merges the two companies’ existing and complementary trade reporting services, and is operated as an "approved publication arrangement" (APA).

In October of 2016 the London Bullion Market Association chose Boat (along with the fintech firm Autilla) to deliver a trade reporting service in 2017 intended to improve transparency in the metal markets.

In the fall of 2007, Cinnober and Turquoise signed an agreement for delivery of the Turquoise trading platform that covered both operation and hosting services. Turquoise, the multi-lateral trading facility (MTF) set up by nine major European investment banks, became a subsidiary of the London Stock Exchange Group in 2010. Along with the Turquoise deal, Cinnober also signed an agreement with Alpha Trading Systems, which was an ATS backed by several of the largest Canadian banks.

In November 2008, Alpha Trading Systems (now TMX Alpha) launched a new alternative trading platform for the Canadian securities market using Cinnober's TRADExpress platform. It upgraded the platform to a new trading system from Cinnober in March 2012. Alpha’s collaboration with Cinnober was behind its win of 20-25 percent marketshare, which made it the most successful ATS at that time. It was eventually purchased by TMX in 2012 and renamed TMX Alpha.

In September 2008, Cinnober continued its growth, announcing two deals to build technology platforms for Burgundy, a trading facility for listed Nordic securities, and another separate deal with the Hong Kong Mercantile Exchange (HKMEx), which marked Cinnober's first move into Asia.

Cinnober followed up those projects with the launch of a new securities lending platform for Quadriserv in October 2008 based on the TRADExpress technology. The platform, which was called Quadriserv AQS, was sold to PDQ in August 2015, provided automated and anonymous trade matching.

Market Surveillance, Risk Management, BM&FBOVESPA Clearing and Umeå

With its trading, clearing, and regulation technology established in the marketplaces, the company moved into the market surveillance area. This proved to be a good move, as it signed on numerous exchanges in the following years.

Cinnober broke into the market surveillance space with a partnership with Stockholm-based Scila in February 2009. The Java-based technology, called Scila Surveillance, was designed with standard connectivity technologies to make it easily adaptable to many exchange trading platforms. Cinnober also took a minority stake in Scila (around 28% shareholding) and the two companies created market surveillance systems for two exchanges, Hong Kong Mercantile Exchange and Burgundy, in the spring of 2009.

The partnership worked well, and they signed on two more firms in the coming months with the London Stock Exchange's derivatives platform EDX London and then Oslo Børs. LMAX, an MTF owned by Betfair, followed later in October 2010 and Deutsche Boerse's Xetra cash market and Eurex in January 2011. The company also sold the system as a European Union pilot project for monitoring wholesale energy markets and added the Qatar Exchange in March 2012 and the Hellenic Exchanges in Athens in May 2014.

Cinnober moved further into the clearing space with the April 2009 launch of a real time clearing platform, which was, in part, a response to the credit crisis of 2008. Built on Cinnober's core technology, the TRADExpress RealTime Clearing platform was a pioneer in the industry as the first realtime clearinghouse solution, surpassing traditional clearing technology, which cleared and settled trades in batches twice a day, or at the end of each trading day. It also enabled users to calculate risk and margin in realtime or pre-trade, and could be applied to cash, derivatives, OTC or listed products.

This was followed closely by a joint-effort for the Stock Exchange of Thailand (SET), in June 2011. The agreement concerned a completely new trading infrastructure, including new trading systems for both equities and derivatives markets, with features for market data dissemination, index calculations and effective market surveillance.

Cinnober then announced a deal with the Dubai Gold & Commodities Exchange to provide trading, clearing, and market surveillance for the exchange. The new system was launched in March 2013.

The company scored a major deal with BM&FBOVESPA, now B3, in November 2011, providing the Brazilian exchange with a new multi-asset clearing system and integrating the exchange's four clearinghouses into one single platform. Essentially, the clearinghouse would handle all of B3's business units: equities and corporate bonds, derivatives, spot FX and government bonds. The first phase, which focused on the clearing derivatives, was launched in August 2014. In August 2017, the second phase was launched in which equities, corporate bonds, and equities lending markets were transferred to the new multi-asset clearing platform. The estimated effect from phase two is BRL 21 billion of collateral (approximately USD 6,4 billion) that was returned to the market with complete preservation of the clearinghouse’s safety system.

In 2011, the London Metal Exchange decided to clear its own trades, and in 2012 the exchange appointed Cinnober as its technology partner to build its clearinghouse, LME Clear. The new clearing service LMEmercury, which included core technology for real-time, multi-asset clearing and risk management, went live in September 2014.

In May, 2012, Cinnober announced the acquisition of Nomura’s Swedish technology development organization in Umeå, Sweden. The deal included 40 specialists in developing equity trading applications and platforms.

About 60 employees worked at the office. Activities included a creative hub, Cinnober Labs, where technology experts – in collaboration with the academic community – have the opportunity to visualize and test their ideas. Cinnober has also collaborated with Umeå University and Umeå municipality to establish a degree program in financial IT.

Veronica Augustsson, who joined the company in 2002, became its CEO in 2012. In 2013 she was named one of the most powerful 125 Swedish businesswomen by the Swedish Magazine Veckans Affärer and was included in Financial News’ “40 Under 40 Rising Stars of Trading and Technology” list for the second consecutive year. She departed in 2018 after open differences with the chairman and co-founder over the direction the company should take.

The company added NYSE Group to its list of surveillance technology customers in October 2014, providing the system to monitor NYSE's three equity exchanges and two equity options markets. In another deal, it agreed to provide a trade validation and confirmation solution to Euronext in the spring of 2015.

In 2015, the pan-European exchange group Euronext launched AtomX, a derivatives trading service that allows users to customize and trade options and futures and clear them through LCH Clearnet, in the same clearing pool as the rest of Euronext's derivatives positions. AtomX is built on Cinnober’s TRADExpress technology.

Big Deals in APAC, Cryptocurrency & Client Clearing

Cinnober posted two important deals with agreements to provide technology to the Australian Securities Exchange (ASX) in 2015 and the Japan Exchange Group (JPX) in 2016.

In February 2015, the Australian Securities Exchange (ASX) selected Cinnober for a major upgrade to its trading technology in which Cinnober’s TRADExpress Trading System would serve as ASX’s equities and derivatives trading systems. The system went live on March 20, 2017.

In February 2016, Cinnober announced another deal to provide clearing technology to the Japan Exchange Group for its listed derivatives market, which is operated by the Osaka Exchange (OSE) and cleared by the Japan Securities Clearing Corporation (JSCC). JPX's exchange traded derivatives market went live with Cinnober’s clearing and risk solutions on February 13, 2018.

Cinnober also moved into the cryptocurrency and blockchain space in May 2015 as a partner in CRYEX, a digital currency exchange, regulated by Swedish regulatory agencies. In July of 2018 Cinnober announced a collaboration with BitGo, a provider of institutional-grade cryptocurrency security, to provide security and surveillance to cryptocurrency exchanges using BitGo's wallet.

The firm announced a move into a new market in November 2016, a back office clearing solution for clearing member firms. The clearing system, aimed at banks and other clearing firms, is an extension of Cinnober's TRADExpress Realtime Clearing platform which is used by exchange clearinghouses. The firm will operate under a new subsidiary, chaired by Cinnober board member Patrick Enblad.

In May 2017, the company acquired Ancoa Software, a UK-based market surveillance firm that provides analytics for exchanges and regulators as well as for buy-side and sell-side firms. Ancoa had filed for bankruptcy in 2016 and the buyout allowed for a transition to Cinnober without disruption to customers. Cinnober named Alastair Goodwin to head up the division as CEO. Cinnober renamed the firm Irisium and sold 60 percent of the subsidiary in May 2018 for £2.571 million in cash to KRM22, a technology and software company. Cinnober held the other 40 percent of the company and took a 9.7 percent stake in KRM22.

Succession Planning, Cinnober Sold, Big Deal Signed

In March 2018, the firm announced the promotion of Hans Sjöberg to chief technology officer, replacing one of the co-founders Peter Lenti, who switched to senior technology architect and advisor. Taraneh Derayati became head of sales and replaced Ulf Axman, who remained on in an advisory role.

After Cinnober's acquisition by Nasdaq in January 2019, Cinnober announced a deal with the OCC, to provide the clearing system for the clearing house.

Products and Services

By the time it was acquired by Nasdaq, all of Cinnober's technology solutions were based on its TRADExpress Platform. Each project was customized with specific technologies and functions layered on top of the platform.

Exchange Technology for Marketplaces and Clearinghouses

Cinnober’s traditional technology focused on business-critical and oftentimes tailored solutions for exchanges and clearinghouses, where the requirements on reliability and quality are immense. The company’s customers include many of the world’s largest marketplaces, and the technical solutions handle large amounts of transactions and market data in various asset classes, such as equities, bonds, commodities, and derivatives.

Cinnober launched TRADEExpress CCP Risk in June 2017 to provides risk and collateral management across all asset-classes and instruments cleared at CCPs for OTC and exchange traded products. The system provides customers with initial margin modeling, credit and liquidity stress testing, credit risk waterfall and liquidity resource pool modeling, market data and risk factor modeling, default fund management, back testing and model validation and collateral management.

For Banks & Brokers

The company provides three service offerings to the banking and broker sector.

Working jointly with London Stock Exchange, Cinnober’s subsidiary Simplitium provided a MIFID-compliant trade reporting service called TRADEcho, which enabled banks and brokers to meet regulatory requirements. With TRADEcho, banks and brokers can report OTC trades in accordance with Pan European regulations. Through ModEx, Simplitium offers a platform for catastrophe risk modeling for insurance companies and re-insurance firms. It also offers services related to the London Bullion Market Association.

Through another subsidiary, Cinnober offered a client clearing service with straight-through processing, from trade capture to settlement. The multi-asset, real-time technology enabled banks to integrate clearing flows, OTC and exchange traded, into one system. The system used technology Cinnober developed in its clearing solution for exchanges. The project received funding from the EU's Horizon 2020 research and innovation program.

The acquisition of Ancoa, which was renamed Irisium, enabled Cinnober to provide contextual surveillance and analytics for exchanges, regulators, and buy- and sell-side firms.

Managed Hosting Services

Cinnober offered hosted and fully managed services to clients, providing mission-critical, sophisticated financial transaction solutions.

Minium Subsidiary for Post-Trade Services

In October 2017 Cinnober introduced Minium, a post-trade technology and services subsidiary for international investment banks. The Minium technology is based on Cinnober's existing technology for exchanges and clearing houses and offers clearing member banks and their customers real-time post trade services. This included a complete overview of their risk exposure to different markets. Cinnober announced its first client, Marex Spectron, in June 2018.

Key People

• 

  Peter Lenardos, CEO

• 

  Hans Sjöberg, Group CTO

• 

  Taraneh Derayati, Head of Sales

• 

  Tom Bendixen, General Counsel

• 

  John Yonker, CEO of Simplitium

• 

  Patrick Tessier, CEO of Minium

• Fredrik Nihlén, Group CFO
• Niclas Holmberg, CEO Cinnober North
• Kestan Hasan, Head of Support & Operations
• Anna Larsson, Head of Competence Management
• Peter Nöjd, Head of Project Office

• 

  Nils-Robert Persson, Former Chairman of the Board