EXCLUSIVE: Pico's Jarrod Yuster On Building A Firm Critical To Smooth Functioning Markets

What keeps a 12-year financial markets infrastructure entrepreneur up at night?

It’s the fear of complacency and not having the wherewithal to keep up with innovation.

“You can never get complacent,” Jarrod Yuster, the chairman, founder and co-CEO of Pico told Benzinga in an exclusive interview regarding a recent acquisition.

Pico is the leading provider of technology, data and analytical services for financial markets. The firm started with an idea and has since expanded upon it.

Yuster was once responsible for programmed quantitative trading and index arbitrage at Bank of America Corp.-owned BAC Merrill Lynch.

After helping build what was the genesis of electronic trading for equities, options and futures in more than 85 markets globally, the trader took his shot at entrepreneurship and founded Pico.

“The role evolves every six months to two years or so,” he said when commenting about how the company was at first a broker-dealer providing technology-driven trading solutions.

“That’s a very hard business model, especially for a small company without a significant amount of capital,” he explained.

After a year or so of building, Yuster discovered that the firm’s cloud-driven technology, connectivity and data were more valuable than the brokerage.

“We realized that the technology business was the real business, and eventually we pivoted.”

Fast forward to today and Pico is backed by the subsidiaries of some of the largest institutions such as Goldman Sachs Group Inc GS and JPMorgan Chase & Co JPM, working with 425 clients including banks, exchanges, electronic market makers and quant-driven hedge funds.

The firm has 16 global offices, as well as connections with 52 market data centers and more than 300 markets.

6 Trends Pico Is Pursuing: Yuster said there are only a handful of trends that have a significant tailwind for Pico’s business.

The first is the continued electrification of markets. As markets in the Middle East and Asia mature, for instance, Pico is looking to be at the center, providing technology, connectivity and data to the emerging ecosystems of financial players.

Another important trend is global borderless trading. “This is where clients want to trade from anywhere to anywhere and receive data,” Yuster said.

A third trend is an exponential growth in trading volumes and data rates. Pico’s role in light of this trend is providing its customers with better monitoring capabilities.

The other two trends include the modernization of aging IT systems, as well as consolidation. “We’re seeing large institutions that want a trusted technology partner which not only understands technology, but also understands their business, market structure, data, regulatory and compliance requirements, and how to apply technology solutions.”

The final trend is where Pico’s understanding of trading markets and technology differentiates. It’s also where recent acquisitions come into play.

Innovate Or Acquire: In the past 12 years, Pico has engaged in a couple of acquisitions.

One such successful acquisition was that of Corvil Analytics, a best-in-class trade monitoring and performance platform which extended Pico’s expertise into analytics and data science.

Pursuant to that acquisition was the roll-out of such things like a 100 Gigabit per second network data capture in partnership with Intel Corporation INTC.

“Their business had typically been a 6% a year. We grew it 43% after the first year,” Yuster said in a discussion about the Corvil acquisition.

Redline Trading Solutions, the most recent acquisition, is an interesting story.

Pico, having been partners with the company for several years, saw the firm was clearly winning in order execution and software data consumption.

“Right out of the gate, their product is available for clients of ours, effective immediately. Pico clients can utilize Redline services within our network and infrastructure,” Yuster noted.

At present, Redline has good coverage in the Americas across equities, options, futures and FX. As part of the acquisition, Pico will extend the firm’s coverage to markets such as fixed income.

“Global exchange data feeds are real-time and historical. Those are raw protocols and almost every exchange has its own protocol; you have to code up to those protocols to consume the data. Redline gives you one common API to access global markets for data and order routing.”

This matters for those clients who need conflated data that works with existing risk management and volatility surface applications which don’t need tick-by-tick updates, for instance.

SPAC And Beyond: Pico plans to merge with FTAC Athena Acquisition Corp FTAA, a fintech special-purpose acquisition company (SPAC).

The proceeds of that Betsy Cohen-backed SPAC will be put toward other acquisitions, as well as the internal growth of the company, such as new hiring.

“There are M&A opportunities that are out there in the marketplace. We’ve got a great team. We’re continuing to add really good talent in this environment and are really excited to get to the public markets,” Yuster concluded.

Photo: Courtesy Pico