By early 2007 HedgeStreet, an internet-based derivatives exchange, had secured close to $30 million in funding from various sources. The company is backed by Norwest Venture Partners as well as the Chicago Board Options Exchange (CBOE) and is now a wholly-owned subsidiary of UK-based IG Group Holdings. Let’s just say that they have plenty of money and expertise to build a robust and fully-featured exchange. Fast forward to July 2008: I revisited the exchange in early July and traded a Gold derivative for 3pm closing on the same date. I couldn’t believe that they still had the same extremely limited number of tradeable products. They still have 3 commodities and each of the commodities has roughly 25 tradeable products. So for gold you can either buy a future on the price of gold that closes at 3pm the same day, or a product that closes 2 days from now. That’s it. That puts the total number of tradeable products for commodities at roughly 75 at any given moment. Compare that with the yoonew exchange where we have over 30,000 tradeable products for Fantasy Seats (for which we make markets, and have streaming real-time pricing, and risk management, order books etc.) and 520,000 tradeable ticket contracts for just one event. Nevermind the fact that the total number of tradeable products have grown and continue to grow at a very fast pace at yoonew.
The other aspect that is fairly surprising on HedgeStreet is the unbelievably limited trading interface. I’m not going to get into all the details but one visit will confirm that the UI looks like it was designed by someone who had no interest in the user. Esthetically and functionally the UI is nowhere close to what we have put together in a few months. The prices that you see for most products are nowhere close to being real-time. There is no way to tell what the current price of gold is at any given time and the prices that are shown are delayed by more than an hour (I’m not even sure how people are supposed to trade on the site if they don’t have access to alternate sources for pricing).
If all that wasn’t enough, HedgeStreet is frequently experiencing extended periods of down-time. Over the past two days I’ve gotten 6 emails from 3 different people at HedgeStreet saying that they are experiencing difficulties and that they are working to correct the issues. Occasional outages and some down-time are part of life in tech heavy organizations but two days straight? With a $30 million budget? Where is all the money going?
I’m just really proud of what we’ve accomplished from a technology perspective with a fraction of the resources given the fact that our exchange is by no means less complex.