Wematch has been live for more than two years now, what would you say are some of your main achievements?
After implementing an initial proof of concept (POC) on a niche product—total return swaps (TRS) on European equities—we have managed to successfully extend the scope of products to the whole range of securities financing structures, for example, TRS, securities lending and repos. Today, we can consider the securities financing platform to be riding on the initial wave, far beyond POC, with 52 legal entities which have been onboarded and close to 600 users in both the Asia Pacific and Europe. Finally, the extension to other asset classes has been instrumental in our achievements as well, with the successful rollout of equity derivatives (exotics) and delta one platforms, which are both now up and running.
What is in your roadmap for the coming year?
The most important milestone that we are about to close is the go-live of our interest rates platform. All of the work that has been done with the teams at J.P. Morgan, who we have been collaborating with for the past six months, is now coming to an end. We will be delivering this platform to the industry soon. Secondly, all the work which we are starting now in cooperation with Société Générale is focused on improving our offer on equity derivatives products. Thirdly, we are working on multiple initiatives with our clients to see how we can leverage our technology and matching engines to answer any internal need they can face.
Is the securities finance industry open or reluctant to innovation?
The securities financing industry has been developing over the last decades in a way which makes it sometimes difficult to leave a large place to innovation. Securities financing products being, by nature, very operationally-driven, means that all of the underlying processes have been pushed to their extreme. The consequence of this is that innovative initiatives are in some instances facing an industry which has, on the one hand, made a lot of effort to streamline processes but which, on the other hand, did not leave a lot of room of innovation.
The operating models and the associated workflows are very streamlined, however, we still see areas where manual processes and operational risks make our users’ life difficult. This is where a lot of innovative solutions can come into play to address those risks and help the dealers focus on what is creating value for their bank. Regulation and the Securities Financing Transactions Regulation (SFTR) cannot be taken as the only one excuse for innovation, as SFTR is going to happen and the changes that will happen are more operationally driven to ensure that the regulatory bodies reach the level of granularity and reporting that they are looking for. Innovation, which will eventually impact the industry, is tackling multiple areas, like digitisation of the dealing process, transparency/best execution, collateral optimisation and smart allocations, cross-product matching, all-to-all initiatives disrupting the traditional agency to dealer ecosystem, and obviously blockchain and tokenisation of assets/collateral. All those initiatives will not be delivered at the same time for sure but will impact the landscape of securities financing at some point in time.
What have been the main challenges for an initiative like yours?
Of course initial resistance to change has been a challenge when we have introduced the solution, however, we are very happy today to see the momentum on the securities financing platform. We are receiving thousands of interests on all structures daily, being securities lending (name specific and collateral upgrades/downgrades), repos, and total return swaps (specifics and financing). The market data is looking pretty busy every day and the nearly 60 users who are permanently connected can enjoy multiple opportunities to share their interests and to get a match. The platform can now welcome any trade structure and offers total flexibility on the contract (reverse securities lending, reverse repos in addition to vanilla structures) and on the collateral options—bilateral, tri-party, pledge, in addition to options related to rating, average daily volumes, financials, sizes. We have enriched the platform so that the users can replicate what they are doing through customised negotiations.We anticipate to reach 1,000 users by the end of the year and we welcome all non-users to reach out to us and to receive their log-in link.
What is the impact of SFTR on your offering?
SFTR will impact securities lending and repos matched through the platform. The impact is expected to be pretty light as will not be involved in the reporting per se. However, when a trade is printed through the platform, we will be providing the unique transaction identifier and then potentially connect with a service provider who could help the client in their SFTR reporting.
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