It’s been a decade since Aquis Exchange hit the road with nothing but a dream – to change the face of the traditional stock market model. The firm has come a long way since then, but its ambitions are bigger than ever. Best Execution sits down with founder and CEO Alasdair Haynes for a heart-to-heart on the highs and lows of the journey so far…, and how he plans to make Aquis one of the top three exchanges in Europe.
Alasdair Haynes knows a thing or two about stock exchanges. The ITG alumnus grew pioneering platform Chi-X into the largest equities exchange in Europe during his tenure as CEO, as well as steering the exchange into profitability. But with its sale to BATS in 2011, he needed a new challenge.
The lightning bolt came in the unlikeliest of places – a Vodafone shop in Tunbridge Wells, back in 2012. His son Alex, about 12 at the time, wanted a new all-singing all-dancing iPhone and, as he was in the phone shop discussing the various subscription models, Haynes suddenly had a brainwave – that’s how a stock exchange could work. It was a Eureka-level moment.
“A subscription model stock exchange had never been done before, it was a crazy idea… but after all – why not?” he explains to Best Execution. “How was it different from a phone service, or Netflix, or any other matching engine? It wasn’t. And the great thing about subscription models is that they grow on the strength of their service, which is exactly what we’ve done since then – because the zero margin payment is so attractive.”
Haynes bought his son a cheap £9.99 Nokia (he was furious) and went straight home to start Aquis on the strength of it – with no idea of the enormous journey he was about to undertake.
A bumpy start
“It was pretty difficult to get off the ground, to be honest, because conceptually it was a hard thing to grasp. And we were seeking to bring transparency to a historically opaque market, which didn’t make us particularly popular.”
Then in 2014 Michael Lewis wrote Flash Boys, which was “in the long-term fantastic but in the short-term utterly disastrous” because the book essentially demonised electronic trading – exactly the thing Aquis was trying to promote. The firm had to refinance several times in the first few years, and Haynes admits that it was “really difficult, really hard”.
One of the worst moments, he says, was the weekend he realised there simply wasn’t enough money left even for salaries. At the time, the firm had just handful of staff – the original ‘Magnificent Seven’ – and Haynes had to tell them in person that they wouldn’t get paid.
“It was the most awful weekend of my life, knowing I had to walk in and say ‘I’m sorry I can’t pay you’ to everyone on Monday morning. I really thought that was the end of the road. And I remember it to this day because Paul Roberts [Aquis’ head of infrastructure] just turned round and said ‘Oh, is that it? We thought you had something important to say. Just pay us when you can.’ And that was it. And that team, that loyalty and commitment, is why Aquis is where it is today.”
At the time though, Haynes felt as if he – and the firm – were on a precipice. “I think a lot of entrepreneurs go through that experience. You’re on the edge, and you don’t know what’s going to stop you from being pushed over it. But something happens, and it changes the game.”
The big break
In 2013, the team were still working from a tiny office in the city that Haynes had sweet-talked for free out of some Irish developers that he knew. They would go in once or twice a week to sit round a single table and plot the future. “But when we put our FCA application in, which was close to 1,000 pages, we used their printers – and of course, wiped them out of ink, paper, everything. And the next day, we got a very polite call saying that we might like to look for our own offices!”
Aquis moved to a space in Old Jewry just opposite the old Fidessa office. And a few years later, things really started to take off. In 2016 the exchange introduced a new rule that prohibited non-client business (prop flow) from crossing the spread, restricting them to making prices only. It was a controversial decision, but it grew their liquidity profile very quickly.
“It was that rule change that made us truly different,” says Haynes. “The liquidity profile of Aquis was unique and afterwards, we suddenly had this massive pool of liquidity. That’s when market share started to grow.” In fact, they grew so quickly over the next two years that by 2018, they decided to take the firm public. Aquis listed on London’s AIM in June 2018, raising around £12 million.
The milestone came as a relief to Haynes, who has always felt a heavy responsibility towards his investors. “That was the turning point, for me,” he says. “I’m a personal person. I really care. So I had many sleepless nights, worrying that I’d lost my shareholders’ money, that they’d trusted me, and I’d let them down. With the IPO, all that stress was lifted, because everyone had the chance to get out, and I didn’t have that guilt sitting on my shoulders anymore. Whatever happened from there, they’d had their chance, they’d made their money, and now we could move on and really build up the business.
“The IPO really was a spectacular moment, and a very special day. That’s why we genuinely care so much about the entrepreneurs who come and IPO on our own exchange. Because we know how it feels.”
Another arrow in the quiver
But he wasn’t finished – and there were bigger fish to fry.
“When we went public, we were a one-trick pony. It was a really great trick, but it was only one trick. What we needed to do was expand, and I realised that the technology on which we’d built the exchange platform was very strong and very sound. So from 2018 onwards we invested very heavily in the underlying technology – and then we got a lucky break by doing a proof of concept for the Singapore Stock Exchange around cloud technology.”
It’s from that cloud technology that Aquis released its latest offering in April 2023: Equinox, a system of perpetual matching in the cloud. “We think that this is not only revolutionary for financial services, but possibly revolutionary outside of financial services as well,” says Haynes.
“We now have a number of exchanges as clients around the world, and that business is going incredibly well – it was our fastest growing revenue business last year. And the sky’s the limit – quite literally. Why couldn’t you use a matching engine for airlines, when they sell seats? Or for theatre tickets? It could apply to almost anything – just like the subscription model. And then the great thing about a perpetual matching engine is that you only pay one license for anywhere around the globe. You don’t have any downtime. You don’t need support systems in place in each location. You change the whole economics of running a business, and that’s where we think there is huge opportunity.
“This whole process was made possible by the firm going public, which gave us the money we needed to invest in ourselves, to become profitable, and then to be able to finance the development of our technology business.”
The final piece of the puzzle
By this point the firm had leased new offices at 77 Cornhill, and it felt like they had arrived. Haynes uses the analogy of the university student.
“You start off in digs at uni, and you’re sharing rooms and it’s all a bit of a mess but it’s great times because you’re just starting out and you have a lot of fun and all your time ahead of you.
“And then you move out and you get a flat with a few mates, and off you go. And then you actually buy your first flat, and you feel that you’ve really grown up. That’s how we felt when we moved to Cornhill in 2017.”
The third arm of the Aquis we know today arrived in 2019, when the firm bought NEX Exchange from CME Group for £2.7 million. A UK-based stock market for growth firms, NEX was one of just four equities-focused Recognised Investment Exchanges (RIEs) in the UK – and a crucial cog in the Aquis wheel, bringing with it access to the primary markets and adding a whole new listings business – an element that the firm believes is crucial in order to foster economic growth.
“Why is America so much better than anywhere else in Europe at this?” asks Haynes. “Because they have competition amongst the primary markets, which drives innovation. You can talk about regulations all you like but actually, if you start to eat somebody else’s lunch, they move very, very quickly. That is much faster than changing an article here and moving a word there.
“America moves quickly because it has competitive tension. It also has demand. Every single person you meet talks about their 401k, their pension. That’s what we have to do in this country – we have to create competition among the primary markets and we have to bring the retail world into the fold – we have to make equities sexy. I keep hearing people say that the problem with this country is that we’re risk averse. The regulators might be, but I don’t think the people are – talk to any teenager you know, and they’re probably trading crypto! We need to move that risk/reward matrix and get equity popular amongst the people. There are billions of pounds sitting in people’s bank accounts, depreciating in this inflationary environment – when they should be investing in what has been the best asset class for the past 100 years: small cap businesses.
“That’s why I’m so excited about the future, because when I look at all three of our businesses, I really think that we’re pushing the envelope with every single one of them, and we’re going to change the economics of the business.”
A rocky road
Of course, it hasn’t all been plain sailing, and the path has provided its fair share of pitfalls
“I’ve always laughed at the adage that you should never work with children or animals – but I’d add technology to that list,” says Haynes. “There’s always going to be a moment when it’s unreliable, when it goes wrong, especially when you’re working at the cutting edge. We’ve had some bad moments there – like an outage, for example. It was only around 10 minutes long, but it’s always going to be damaging.”
Aquis has also had to deal with its fair share of detractors. “I’ve had people writing really rude things to me, to members of staff. I’ve received some pretty vicious and unpleasant emails from members of the public who are disgruntled over a share price, for example. Or there was a broker who wrote to one of my team a few years ago that they were never going to deal with us, never use us, never be involved with us. It was very upsetting. Satisfyingly enough, they recently applied to join Aquis.”
It’s the old saying: success has many fathers, but failure is an orphan.
“It’s been a difficult journey,” agrees Haynes. “But a very rewarding one.”
Where next?
The firm, which in 2022 moved into new and even bigger offices (which it is already starting to outgrow), is now one of the top 100 fastest-growing public and private businesses in the UK, and one of the top 500 in Europe. But it doesn’t end there. Currently the seventh-biggest exchange group in Europe, Haynes has made no secret of his ambitions to advance further.
“My ambition has always been to be a top three player, and I can’t see why we shouldn’t achieve that. I wouldn’t want to say when, but we’ll definitely continue that crusade. What I love is that the exchange business is in a period of huge change right now, not just in the UK but globally. We’re operating in a world that uses yesterday’s technology and yesterday’s ideas. It’s all about how markets will trade in the future, and about how we can get scaled up capital to businesses in an easier and more flexible way.
Accelerating the adventure
“There’s a huge opportunity here for someone to get it right. My vision is the day when anyone can pick up their smart phone, pay a few dollars a month, and trade any asset class around the world with access to all the information and research that they need. That is going to be the wealth creation tool for the young people of today. The baby boomers made capital in ways that the next generation don’t and won’t have access to. So I think it’s our responsibility to make it easier for them to create wealth in new ways.
“There’s a reason there is no gambling tax. Because most people lose money when they gamble. But the government taxes you for investment. Why? Because if you do your homework, and you have the ability, you will make money. Part of the Aquis story is going to be helping the next generation to trade assets more simply and more easily, giving them the same access as institutions and all the other stakeholders in the market. I think that is going to be a game-changer over the next 10 years.
“We’ve already managed to create something meaningful, that has changed the infrastructure of exchanges around the world, just with a vision and a bunch of mad ideas,” says Haynes. “But every so often, one of those mad ideas works. And that atmosphere hasn’t changed. That entrepreneurial spirit, it hasn’t died.
“A lot of people said we wouldn’t last. But here we are, and we’re going to be around for a long time, because we’re making money. And now that we can afford to invest in ourselves, that’s when we can start to get really adventurous. We’re only just getting started.”
Party time
There might be exciting times ahead (and there’s certainly a long road behind) but last week Aquis took the time to take a breath, hit pause – and throw a party. To commemorate its 10th anniversary the firm invited 600 clients, supporters, stakeholders and friends to join in an evening of celebrations at the Museum of London on 18 May 2023. A night to remember, the party started with speeches from the board before lasting long into the early hours: a fitting way to celebrate the long journey it has made from just a tiny start-up to the juggernaut it is today.
“I’m very proud,” admits Haynes. “That 12 years ago, down in my little office in my house in the depths of darkest Kent, I gave birth to this bonkers idea. It is fantastic – astonishing – to think that 600 people came to my party to celebrate the result.”
And what about Haynes himself – is he set to retire any time soon? It seems unlikely. The Aquis CEO, who has a particular fondness for A A Milne’s Winnie the Pooh, was recently described as Tigger during the firm’s latest board meeting because of his boundless energy – and he has no plans to calm down.
“The last 10 years have simply flown by, and I have every intention of being around for the next 20 years as well.”
©Markets Media Europe 2023
