Anetics, Inc
Rob Sammons
16 September 2014
Regulatory reform and the application of new metrics to capital utilisation are changes that await no participant, as Rob Sammons of Anetics explains
Image: Shutterstock
Almost a year ago, Argent was enhanced to automatically receive borrow orders through Twill’s new Deals utility—how did this work and how was it received through your client base?
We’ve done a lot of experimenting with the Twill product, little of which has actually grown legs and found its way into regular production use. The most important function that Twill does, and does very well, has become a best-practice at about a dozen firms. This is to mine the information content and order flow that gets circulated by email. Items that desks are pushing as available, or need to borrow or locate, get picked up by Twill, cached in a database, then cross referenced to show dealing opportunities.
We expect that over time, email will become less important in this regard and we are already piloting yet a new protocol for more accurate distribution of data between trading partners that’s as easy as sending an email, but more precise. We’ll keep you posted as this becomes available for trial.
What other additions and developments have you added to your product offerings in the last 12 months?
Customers have been looking for additional ways to generate revenue. New product development has been focused in this area. Just last month, we enhanced our ‘put-to-hold’ locate utility to also function for ‘pay-to-hold’ complete with a mechanism to bill customers for held securities, as well as a way to share the revenue generated with the beneficial owner that sourced the inventory (with a spread for the dealer, of course). This will be released to production later this month and we expect such billing for held items to become more popular.
Earlier this year, we brought out a new version of our rebate/fee allocation module (distributes revenue from the short customer to the house and/or long customer). Some firms call this transfer pricing. We now call it customer billing. The new utility creates the appearance of conduit dealing while balancing the long and short side of the box with virtual contracts that can be priced discretely or automatically set based on rules.
To round out the new development, two customers are talking to us about offering our Short-Sale Locate utility as a fee-based service. While last year we implemented online discussion capability and a method to secure customer approval for pre-borrow and hold, this new use will enable the stock-loan desk to grant a locate and levy a fee.
What are you hearing as the biggest challenge facing the industry at present?
This would be adapting to change. We hear that even the most important internal business initiatives at customer sites take months (if not years) to get coordinated and deployed. The status quo is very difficult to reshape. Breaking out of the mold to adopt new methods and processes runs against the grain of human nature. The industry moves through the day like a huge oil tanker through the ocean—slow, steady, stay the course, make the delivery—at a time when customer transactions are taking place around the world at the speed of light.
Regulatory reform and the application of new metrics to capital utilisation are changes that await no participant. These are the projects that must get done. This leaves little capacity for other initiatives that might enhance efficiency, reduce costs or streamline operations.
What is the biggest challenge facing firms such as yours?
Hiring good talent and finding enough time in the day to address the fringe opportunities that are the future of our business. We too get caught up with daily processing and the task of insuring that all customer commitments are acted on in a timely manner. This leaves little extra to pioneer the new methods that represent our future.
We are fortunate in that we have adequate capital to fund many of these new ideas and the related opportunities, but find it difficult to recruit or allocate the talent necessary to help it along.
If you could change one thing about the industry, what would it be?
Reshape the hegemony that dominates the industry as it relates to transaction processing and the communication of needs and availability between trading partners. The technology exists today for easy, low-cost bilateral communication between stock-loan desks, one-to-one and one-to-many, without having to wire up to a hub or join a club with membership as a requirement to trade.
Stock loan as an industry remains behind the times in the communication protocols it supports and the methods employed in counterparty dealing. Some of this relates to barriers to communication between systems and service providers.
At a time when technology costs in general are dropping (in some cases exponentially), depending upon the platform of choice, the cost of a stock-loan transaction is on the increase. This at a time when many clearing organisations have higher volumes and lower ticket value. There need be systems in place to support the low-value order as well as the high-value finance transaction.
What does the future hold for Anetics?
The future looks bright as we are doing more higher-valued work for existing clients while continuing to add new customers to our client base. The industry trend for a firm to outsource most any process or service that can be done better and/or at lower cost by a vendor continues. We’ve seen some of our oldest clients dismantle entire internal teams while distributing such responsibilities to one or more external vendors. Not all of that work ends up in our shop, but we do get our share.
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