South Carolina’s already thin ranks within the so-called fintech world is about to get a little leaner.
A firm hired to build an unprecedented database that would track all U.S. stock trading activity is being replaced, resulting in several dozen job losses at its low-key downtown Charleston office.
Thesys Technologies disclosed the 41 layoffs at its peninsula outpost in a filing with the S.C. Department of Employment and Workforce. They'll take effect by April 15.
The firm filed a similar shutdown notice with labor officials in New York, saying 35 employees at its Big Apple office are being let go over the next two months because the big-data deal is being terminated.
Thesys was at the vanguard of an ambitious plan to scoop up and store information on every trade that flows through the U.S. equity markets, where more than $80 trillion change hands each year.
Known as the “Consolidated Audit Trail,” or CAT, the moonshot project was launched after the frightening "flash crash" of 2010, when sell orders from runaway computer-driven algorithms sent Wall Street into a tailspin and wiped out nearly $1 trillion in wealth in a matter of minutes before rebounding just as quickly.
It took regulators seven months to piece together enough data to explain the basics of what had happened.
So the Securities and Exchange Commission in 2012 called for the creation of a warehouse to record all stock and option transactions — from when they're placed to when they're carried out or canceled — to give market watchers a clearer and more immediate picture of big price swings.
It was to be the largest repository of its kind in the world, logging an estimated 58 billion online records a day. The cost of building it out has ranged from $350 million to as much as $1 billion.
A consortium of exchanges charged with building and paying for it hired Thesys to do the technical legwork about two years ago. The firm, which previously developed software for analyzing trading data and detecting rogue algorithms, beat out IBM, among 30 or so other bidders.
“We’re confident in Thesys’s management, technology and resources to implement this important regulatory initiative,” the consortium said in January 2017.
The company called the project “one of the most important market initiatives of our time” soon after it was awarded the job.
At least some of the expertise required to pull off this herculean technological task was to come from Charleston, where Thesys quietly opened an office at 25 Calhoun St.
A key link between the company and the Lowcountry was Automated Trading Desk, considered one of the most successful financial technology ventures ever to come out of South Carolina.
The local startup was a pioneer in the high-frequency stock-trading industry. It eventually caught the eye of global banking giant Citigroup, which paid $680 million for the Mount Pleasant-based business in 2007 and later sold it to Citadel Securities in Chicago. Former ATD engineers and executives were among the early recruits at the new Thesys office.
Two years in, the database project has encountered its share of bugs. Thesys rolled out the first phase in November, a year behind schedule. Not only was it late, it didn't function as expected, according to news reports.
Meanwhile, the American Securities Association, which represents regional financial services firms, has been railing about privacy concerns. It's demanding that sensitive personal information about U.S. investors be scraped from the online storage site.
"The ever-present threat of a cyberattack on large databases is an unfortunate reality that must be dealt with," Christopher Iacovella, the trade group's CEO, said in a letter last week to SEC regulators.
In an aside, Iacovella added that he "welcomes" recent reports that Thesys is being "fired," suggesting some level of dissatisfaction, but he did not elaborate.
The group that hired the company announced last week that its bringing in a new vendor. In the interim, Thesys remains on the job. It also will assist with the transition.
“Thesys has been extremely cooperative in this process, and we’re thankful to them for that,” said Michael Simon, a representative for the exchanges.
The company has described its exit from the project as a mutual decision, telling the Wall Street Journal that the "parties have irreconcilable differences."
A Thesys spokeswoman said in a statement Thursday that the firm is winding down its Consolidated Audit Trail database operations in Charleston and New York. It will maintain the system until March 31, she added.