It was the sort of long-shot inquiry that would have never worked in Canada. Shortly after the 2001 meltdown of Enron, the energy trading giant, U.S. financial regulators came down hard with tough new rules meant to make securities dealers and other investment firms much more accountable. Among the key reforms: Provisions requiring financial markets participants to cache huge quantities of electronic data, from trading orders to emails.
At the time, Global Relay Communications was a two-year-old Vancouver tech firm trying to promote a service for archiving emails for corporate clients in exchange for a subscription fee. It was a rudimentary “cloud” service in the days when that word still had mainly atmospheric connotations.
Founder Warren Roy recalls that around that time, his friend and squash partner William Sauder urged him to look to the U.S. for growth because, as he recalls, “it’s easier to do business with Americans.” Little did he realize.
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As the post-Enron accountability legislation came into force, Global Relay’s fourth employee, lawyer Shannon Rogers, decided on a lark to put in a call to a U.S. financial regulation agency tasked with implementing the new rules. “We just phoned them up.” Global Relay, she explained to the head of the agency’s regulation services, had developed a technology for externally storing large quantities of email. Could it be adapted to meet the needs of securities dealers that suddenly found they had to start saving every digital scrap?
As it transpired, the agency, now known as FINRA or the Financial Industry Regulatory Authority, had no idea how to enforce the new rules. The senior official Rogers had approached was only too happy to offer Global Relay advice on how to adopt the company’s technology so it could deliver an archiving service to market players. Indeed, over the next five years, FINRA provided vital guidance to Global Relay as it honed its system so it could be used by investment banks, hedge funds and issuers. “We just built exactly what they needed,” says Rogers.
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It was a strikingly helpful gesture. As Roy adds, “You’ll never find a regulator in Canada that would help you as a vendor.” The U.S. officials, he adds, “went above and beyond” to help an upstart B.C. firm.
FINRA’s support opened the door to an international market that grew explosively, first in the immediate aftermath of the post-Enron laws and then again with the post-2008 credit crisis reforms. Today, Global Relay, which is ranked 89th on the PROFIT 500, has $40 million in revenues and more than 17,500 customers globally, including almost half of the broker-dealers registered with FINRA, 70% of all Securities and Exchange Commission hedge funds and 22 of the world’s 25 largest banks. About 95% of the company’s revenues come from outside Canada.
Global Relay’s earliest U.S. customers were smaller brokerage firms because the large financial institutions had no intention of outsourcing their data storage to third parties.
The company made the most of its connection with FINRA, says Roy, but it also benefited from blind luck. Global Relay’s first large institutional U.S. customers were the Chicago Stock Exchange and a division of General Electric. As it turned out, both companies, scrambling for archiving services in a market vacuum, responded to a 25-cent-per-click Google ad, for e-mail archiving services, that Global Relay purchased in 2004.
Following the 2008 collapse of Lehman Brothers and the subsequent implosion of global credit markets, demand for this kind of service exploded, expanding well beyond the confines of the North American investment world. Roy points out that the company was able to take advantage of the heightened attention from international financial regulators and central bankers to win over customers in the world’s other leading investment capitals—London, Singapore, Hong Kong and Tokyo. “The financial world adopts U.S. standards,” he says.
Interestingly, while Canadian financial regulators a decade ago didn’t offer much help to the fledging firm, Global Relay has exploited an important strategic advantage associated with its national origins. As Rogers explains, Canada—unlike the U.S. —has very strong data privacy laws. The company’s clients know their private internal correspondence sits beyond the reach of intrusive law enforcement agencies. “Having a company holding data in a private cloud worked well.”
In fact, Global Relay was so confident of this particular strategic advantage that it built its own $24 million data centre in Vancouver last year.
That capital investment has positioned Global Relay to make a dramatic change in direction, which has been in the works for five years and will launch later in 2014. After archiving billions of e-mails or documents for over a decade, the company is launching its own secure messaging service aimed at investment industry users.
While the service, to be branded Global Relay Messaging, may seem to compete with BlackBerry’s BBM network, Roy contends that it will allow financial services customers to automatically archive text messages in ways that comply with existing regulations, something BBM doesn’t do.
As Global Relay prepares to propel itself into this vast new market, the question facing Roy is this: Will BlackBerry, still struggling to re-invent itself, get the message?