How has FIS adapted to the dramatic changes in the securities finance and collateral markets in recent years?
The reaction time to changing market conditions has become shorter and shorter over the past few years. This requires more proactive thinking and more flexible solutions that can be enhanced and complemented with new components. Also, our clients are some of the biggest financial organizations in the world, and we have a responsibility to not only support their technology needs but provide industry expertise.
So, we need to be sufficiently ahead of the curve to deliver what our clients need, when they need it. By moving all our related securities finance and collateral products and resources into a single group, we are reflecting the direction of travel in the industry.
Our combined suite of products and services enables us to cover a broader spectrum of the securities finance and collateral value chain and provides our clients with integration across the front, middle and back office. We are also seeing a much higher demand for the cloud delivery of our platforms as the pandemic has proven the importance of infrastructure resilience and high availability. Leveraging our scale to provide such holistic offerings is core to our position as a trusted partner to the market, not just another vendor.
What innovation and modernisation is happening within the securities finance group?
On modernisation: the FIS securities finance product group is actively building the next generation of market-leading platforms. These are cloud-based and allow for more informed trading decisions through smart integration with our intraday market data. This supports our clients’ aggressive growth plans by featuring higher trade automation with open application programming interfaces and standardised market connectivity. We are also investing in process automation of front-, middle- and back-office functions and post-trade processes across the securities finance and collateral solution suite.
In terms of innovation: we launched a process to actively drive innovation when we restructured the securities finance and collateral business entities into a single homogeneous product group earlier this year. The newly formed product group went through an intense period of discovery meetings with a number of industry exponents, clients and analysts to a) reconfirm our understanding of the key challenges the securities finance & collateral industry is facing, b) validate their respective priorities and urgency, and c) collaborate on the design of new solution components.
This outside-in approach ensures that we focus on real market needs. The innovation projects in which we are currently investing, leverage recent investments our company made in advanced technologies such as artificial intelligence and blockchain. For instance, FIS recently signed a partnership agreement with C3.ai, a leading provider for enterprise-scale AI applications and accelerating digital transformation solutions and products. The first results of this cooperation are targeted to be brought to market in Q2 2021.
The innovations within our securities finance and collateral solution suite leverage a new simplified domain model with lean and ‘simple-to-deploy’ components. Their main value-add resides in smarter inventories that result in greater leverage of the universe of tradable assets, higher trade automation and more informed trading decisions thanks to machine learning algorithms.
What does this mean for FIS securities finance and collateral clients going forward?
The decision to align our innovation strategies and resources is already benefiting our clients. For example, we are working with one of the largest European asset management groups to implement a platform for consolidating and optimising the global inventory of the funds’ assets. Our platform drives an internal lending programme between the funds as part of a holistic inventory optimisation programme servicing derivatives collateral requirements, funding and securities finance. This will give our client significant cost savings and increased revenue opportunities as the funds balance securities-based margin requirements with growing liquidity demands.
In the US, we are partnering with one of the largest pension fund managers to provide a single platform for securities lending, repo and over-the-counter (OTC) and listed derivatives collateral management as well as providing the calculations and market data for the cleared and bilateral initial margin requirements. The availability of a comprehensive solution from a single partner was key to our client and an example of how the breadth and depth of FIS’ capabilities create added value.
What types of market participants does your solution suite service?
Our securities finance suite combines the capabilities of our individual solutions within securities finance and collateral to cover every aspect of the securities finance industry: all transaction types and asset classes along every step of the transaction chain. The suite is designed to support the full spectrum of institutions that are active in the securities finance and collateral market: sell-side and buy-side, borrowers and lenders.
However, not every organisation needs the entire suite, so we have created powerful combinations of tools and services to satisfy enterprise-wide demands. For example, servicing the critical need to combine the collateral requirements of your OTC derivatives business with your securities finance programs. During a recent FIS webinar poll, 87 percent of organisations already have or are planning to connect these segments, making better use of their assets to meet their liabilities.
How important is market data in the effectiveness of the FIS suite?
I have been in the securities finance industry for many years and many aspects of it are unrecognisable from when I started out. The importance of intraday market data and associated trade analytics is just one of those significant changes that have helped the market develop and become more profitable. The industry has also made significant advances in technological capabilities and the automation of manual processes, which were required to manage the expansion of our business, both in terms of volume and complexity.
The management of the vast quantities of data that’s now available has also demanded serious innovation to ensure that data is turned into actionable information. FIS has long been a leader in this space and is bringing new solutions to market this year with the latest version of Astec Analytics Lending Pit.
However, the real advantages are created when actionable information is brought into the center of the user’s workflow. This is where the integration of market data and AI leverage supports automated trading, marking and optimisation. Doing more with less has been a mandate for the securities finance industry for some time; automation supported by intraday data is a key part of responding to that pressure.
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