At the beginning of February, Cboe acquired options and volatility analytics firm FT Options to further build out our Information Solutions offering. FT Options offers a suite of customizable, automated, integrated applications that provide research and analytics functionality across options, futures and light exotics for proprietary trading firms, hedge funds and separately managed accounts. We talked to the company's founder, Michael Izhaky, about his background, how he built FT Options and why he’s excited to join the Cboe team.
With a dual degree in business and engineering, it’s no surprise that when Michael Izhaky, founder of FT Options, had a problem no existing tool could fix, he built a whole business around the solution.
After graduating from the University of Pennsylvania, Michael took a job as a trader at Chicago firm O’Connor and Associates, where he traded FX options on CME’s trading floor, and then moved upstairs to trade and risk manage OTC FX options and exotics. “At O’Connor I received top-of-the-line trading education and experience from a very sophisticated market leading firm,” says Michael, Cboe’s newest Vice President, Head of Capital Efficiencies.
He later worked for Goldman Sachs before joining a buy-side firm, where he was surprised by the lack of advanced tools. Michael searched for a solution his firm could buy but it simply didn’t exist. Having caught the entrepreneurial bug, he set out to build an advanced system for internal use, but quickly realized the required investment was too expensive.
“The economics didn’t make sense,” he says. “So instead of building a scaled down, less comprehensive proprietary solution, it made more sense to build a customer-facing service.”
And thus, FT Options was born — a vendor-provided risk analytics service, customized to meet the diverse needs of its client base. Michael built the company over nights and weekends for a few years before making FT Options his full-time focus. (If that didn’t prove Michael’s dedication to building a successful business, he also went back to school 17 years into his career and earned his MBA from Northwestern University’s Kellogg School of Management.)
“FT Options was created to give portfolio managers advanced optics into the structure of their portfolio, which could then help drive their hedging and investment decisions,” he says. “We focused heavily on user-defined customized workflows because analyzing individual portfolios and strategies is not a one-size-fits-all business.”
But that kind of customization brings added challenges to development. Luckily, after assembling a first class product and engineering team, FT Options found the sweet spot, balancing customization capabilities with the need to scale through a repeatable model. FT Options was a first of its kind, not only in the capabilities it provided, but also in the way it provided them.
“Our customers had a problem to solve, and we had a solution. You need risk management and pricing? We put everything together in a service and all you have to do is bring your model and position and we’ll calculate everything you need. It’s a fully comprehensive service,” Michael says. “But risk management using third-party software as a service wasn’t as common 10 years ago, so everyone wanted to deploy and control the system themselves, which is difficult to administer and scale. Once using third-party services became accepted industrywide we were really able to knock down barriers.”
Knocking down those barriers allowed FT Options to continue to grow, acquiring a variety of industry customers, from mid-tier banks and trading firms to hedge funds and mutual funds. The critical risk and valuation optics FT Options delivers can be especially important in times of volatility, as the last few months have shown.
“When uncertainty increases, optics become one of the most critical components to making good decisions. It’s like having a compass and navigation charts when you’re sailing in rough waters,” Michael says. “It’s even more important to be able to know where you need to go when things start getting dislocated. Our customers depend on these optics to make informed decisions.”
This kind of customer-focused solution fits perfectly into Cboe’s Information Solutions offering. FT Options helps fill out Cboe’s analytics offering, guiding customers through the entire trading lifecycle. For Michael, joining Cboe is exciting for a number of reasons, including the opportunity for the FT Options team to work side-by-side with familiar faces at Hanweck.
“FT Options was a longtime client of Hanweck’s. We used their real-time analytics and enhanced them with ours. It’s great to shift from client-vendor to fully collaborating and working as one combined team under the same umbrella at Cboe.”
Michael says he’s also looking forward to having a whole suite of products to offer customers who are looking for additional solutions, whether that’s data from Cboe DataShop or trade execution from Silexx.
Not to mention, FT Options was previously a long-time sponsor of Cboe RMC giving Michael and his team a good sense of what kind of community they’d be joining.
“On top of the business-related benefits, joining Cboe has been tremendous,” Michael says. “I’ve heard people say that ‘success leaves clues’ and I’m seeing those clues throughout the entire team at Cboe and I’m definitely excited to be on the team and work on several new initiatives.”