A former ferrous derivatives broker is planning to disrupt the interdealer broker, or IDB, space with technology that automates the function, offering "huge" savings for users.
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Jos Evans, who helped invent the iron ore options market and sold his own company Red Ops to major broker Simpson Spence Young, has a two-year exclusivity period over Rainbird technology in the IDB sector.
Rather than deal with a typical "box" connecting them with end-users, Evans' company, AI Exchange, will allow traders to deal direct with fully auditable technology that amasses and processes quotes from the rest of the market.
"AI-X will be radically different and inherently better: it will be a sophisticated artificial intelligence chatbot with built-in voice capabilities, replacing 'boxes' with an Alexa-type device that clients will be able to consult for trading quotes while also providing standard chat functions over IM," AI-X says in its white paper.
Evans intends to hire leading brokers in their respective spaces -- whether equities or commodities -- and have them push AI-X to their clients.
He believes AI-X will be able to win around 75% of interdealer broker revenues and said the top three players alone in the space have revenues in excess of $4.5 billion.
AI-X will be free of charge, operating on a commission-only basis, and Evans anticipates commission will be a minimum of 50% cheaper than those being paid to brokers, depending on the market: one of the first markets targeted is iron ore derivatives, where Evans cut his teeth before becoming an angel investor in various tech start-ups.
The company's initial coin offering, or ICO, will go live September 1, with an initial soft launch aimed at institutional investors before it opens to the wider public.
The ICO is open for a month, but Evans conceded it will be "dead in the water" if it fails to gain traction on its first day.
Via the offering, Evans hopes to raise $250 million-$300 million, which will provide the capital for AI-X -- the technology already exists, but it is yet to be deployed in the IDB arena.
Profits generated by the company will be used to buy back AI-X tokens from the open market, until all have been purchased.
Other ICOs have been fully funded very quickly, Evans said, pointing to Filecoin, which raised $186 million during its first hour of fundraising.
Evans opted for an ICO for fundraising given their flexibility, topical nature right now, and as he wants to "get more intimately involved in the crypto space."
He has canvassed market participants ahead of the ICO and said most concur the broker function can be automated.
"The current functionality is incredibly poor value and adds nothing above and beyond execution," he said, adding that the function can be improved by as well as automated.
AI-X will not only process and agglomerate data, it will also look to historical patterns -- accounting for interest rates and bond prices, for example -- and advise traders as to potentially profitable moves, Evans told S&P Global Platts.
Questioned about the viability of AI-X, Evans pointed to hedge fund Renaissance, and its success in harnessing "big data analytics" to provide returns to investors.
All the information is publicly available, he said, but AI-X plans to democratize access to the trading community.
AI-X will utilize blockchain technology to provide a ledger for all transactions and processed data.
--Colin Richardson, email@example.com --Edited by Irene Tang, firstname.lastname@example.org