25 Calhoun

The financial technology firm Thesys opened an office in this 25 Calhoun Street building in Charleston. The company won a contract to build a massive database tracking every trade in the U.S. equity markets. File/Thad Moore/Staff

An ambitious plan to track American financial markets and collect reams of data on their every move could soon flow through Charleston.

A firm with close ties to the Lowcountry will be building a system that tracks every trade that flows through U.S. stock and options markets. The project, mandated by federal regulators, will create the largest repository of market data in the world - expected to log 58 billion records a day.

And much of the technical expertise to pull it off will come from downtown Charleston. New York-based Thesys Technologies, a small financial technology company, has one of its two offices on Calhoun Street, where its chief technology officer and several engineers work.

That could give South Carolina a leading role in a project intended to help the U.S. Securities and Exchange Commission keep up with what's happening in the markets, even as trading algorithms can now place orders, change and cancel them in the blink of an eye.

Known as the "consolidated audit trail," the project stems from the 2010 "flash crash," when runaway algorithms sent the stock market into a tailspin and wiped out value worth close to a trillion dollars in a matter of minutes - before bouncing back just as fast. It took regulators months to piece together data from stock exchanges and figure out what happened.

So in 2012, the commission told the exchanges they'd need to build a comprehensive database - one that could track, down to a tenth of a millisecond, when every order is placed, when it's changed and when it's carried out. It's a massive paper trail of sorts, one that's expected to total 21 petabytes, or 21 million gigabytes, of data within five years.

To win the contract, Thesys beat out some of the biggest names in the industry: Proposals came from 31 bidders, including IBM, the financial software giant SunGard and the Financial Industry Regulatory Authority, a private industry oversight agency. The winner was ultimately selected by a consortium of stock exchanges.

"We're confident in Thesys's management, technology and resources to implement this important regulatory initiative," the voting committee said in a brief statement announcing the decision last week.

But Thesys, which lists 27 employees on LinkedIn, had a few advantages, said Larry Tabb, founder of the Tabb Group, a New York consultancy that has tracked the selection process.

It had already built software that analyzes trading data and looks for signs of out-of-control algorithms. And its parent company, New Jersey-based Tradeworx, sold the SEC a tool that compiles exchange data. That system collects about a billion records a day in an effort to keep tabs on high-frequency trading, the algorithm-driven practice of buying and selling shares in a fraction of a second.

"They're not starting from scratch, and I think that has a big advantage over some of its competitors," Tabb said. "Their capabilities with equity market data is on the cutting edge."

The company may have also cut a bargain. The project was widely expected to cost billions to build and maintain, but in a 2014 presentation, Thesys estimated it could build the system for $30 million and run it for $27.5 million a year.

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Thesys, Tradeworx and the committee that picked them couldn't be reached for comment. In a statement Tuesday, Thesys called the project "one of the most important market initiatives of our time." A spokeswoman for the SEC declined to comment on the selection.

How much of that money will sift through the Lowcountry isn't yet clear, but Thesys has a substantial local presence. Almost half of its employees on LinkedIn say that they live in the area, and three of the four jobs it lists on its website are for software development and engineering openings in Charleston.

They include chief technology officer Thaddeus Covert, formerly an executive at Automated Trading Desk, a Mount Pleasant business that helped spearhead high-frequency trading. That company no longer has a presence in the area, but when it sold to Citigroup in 2007, the $680 million price tag was one of the biggest ever recorded in the region. Citi sold the bulk of the business to Chicago-based Citadel Securities in May. 

Also uncertain is how much work Thesys will have to undertake, and how much its existing products can already handle. Tabb said the task ahead is likely to include finding a way to store the trove of data and building tools for regulators to analyze it.

In any case, the system will get its first test before long: Under the SEC's requirements, data will start flowing in from stock exchanges within a year.

Reach Thad Moore at 843-937-5703 or on Twitter @thadmoore.