The digital future
28 May 2019
Walter Kraushaar of Comyno provides an outlook on the digital future of securities finance using distributed ledger technology
Image: Shutterstock
The securities finance market historically has been competing over products and personal relationships. For decades IT was rather seen as a supporting tool than a business driver or innovator.
In today’s digital age, competition is rapidly increasing through the creation of platforms and networks which offer straight-through processing, connectivity and distributed ledger technologies (DLTs).
Nowadays, the ultimate advantage over the competition is achieved by building a better platform and offering full connectivity to other trading platforms and systems, rather than continuing the use of existing outdated product suites.
In light of the need for transparency driven by the new regulatory reporting requirements such as the Securities Financing Transactions Regulation (SFTR)—among others—many market participants, regardless of being big or small, are burdened by the need to break off silos and fulfil all regulatory requirements. However, new reporting requirements should not only be seen as additional operational efforts. They, in fact, increase transparency not only towards the regulators but also towards senior management within their own organisation. This new transparency should be used to better manage inventory, client relationships and risk.
After the financial crisis banks, brokers and asset managers have spent a lot of time, efforts and money reorganising their businesses, to introduce new business models, modernise their IT infrastructure and use new technologies to bring the best solutions and products to the market.
However, these strategic investments have often led to a jumble of old systems, knowledge, processes, and corporate cultures.
At the same time, new digital companies are entering the market without legacy issues and with a new digital approach to today’s markets and regulatory challenges. As a result of the old system infrastructure, digital platforms and DLTs have been introduced to the market to handle the increased volumes of data more efficiently, quicker and cheaper with a variety of connectivity options to communicate with other IT systems.
In general, a digital platform creates a combined development and delivery environment that provides users with consistent, accurate and timely data. A data management platform imports data from many systems and enables customers to view the data in a consistent manner. On top, DLT provides the technological infrastructure and protocols that allow simultaneous access, validation and record updating in an immutable manner across a network spread across multiple entities or locations—blockchain is a special form of the DLT.
Comyno has taken this forward-thinking approach even a step further to create a digital securities finance trading platform, called C-ONE. This platform combines trading, data management technologies and data analytic tools into a single software suite with an intuitive and easy-to-navigate customised dashboard/cockpit incorporating DLT and providing almost unlimited connectivity to other systems, platforms and data services.
With its plug and play technology, Comyno provides variations of such trading and analytic tools as:
• C-One Trading
• C-One Collateral
• C-One Risk Management
• C-One Reporting
• C-One Allocation tools (for example, fairness algorithms for the automated allocation of fund inventory to trade requests)
The tools can be designed for the clients solely based on their respective requirements because the aforementioned technologies allow a fully automated and customised product.
A key role of the new technology used for the C-ONE platform is to collect structured and unstructured data from a range of internal and external sources and to then integrate and store that data in a private or public cloud. The digital platform also analyses and organises data to provide insight and tailor-made reporting to data-driven parts of the business, such as securities finance trade, risk or counterparty analysis.
The data incorporated into the platform can be first-party data, coming from an organisation’s own applications, systems, websites and products, as well as second-party data from the outside world which is needed to add all necessary information to the record. In addition, platforms use third-party data to fill in gaps in a company’s own data environment.
Subsequently, Comyno’s approach has always been to provide a proficient tailor-made securities finance platform that combines the client’s specific business and reporting requirements with the necessary connectivity of the platform.
C-ONE connects almost any existing clearing house, tri-party agent, central counterparty (CCP) and other IT system solutions for in-house trading systems in the securities finance world.
By building a digital platform, one party can easily connect its business with another party by using fully automated straight-through processing to connect products and services, co-create value, minimise errors arising from manual tasks (such as dual entries) and save costs overall.
This ability to ‘plug-and-play’ is the defining characteristic of ‘digital platform thinking’ by Comyno and has resulted in the development of our C-ONE platform.
The digital approach is already a trend in many other industries, where one can see more and more companies shifting from products to platforms. In the securities finance industry, Comyno has already taken the next step to support that trend for the buy- as well as the sell side.
Most of the competing ‘traditional’ securities finance systems currently available on the market, offer a rather standardised securities finance product suite which comes at a high cost, licensing fees as well as complex interfaces and still cannot satisfy the heterogeneous needs of the market participants.
Unlike these systems, the Comyno C-ONE platform will offer customised adaptors and functionality available as specific tools as well as single products, which can stand alone or be combined in any possible way.
The clients will always decide based on their own business requirements and budget, which combination of tools, products, connectivity adaptors and other services they will need to build their own personalised C-ONE platform.
In addition, Comyno offers independent strategic advice to find the right business and IT strategy and helps to manage the implementation of the respective tools and/or the digital platform itself. The client has the freedom to either integrate C-ONE and/or the required tools into its existing infrastructure or to implement a completely new tailormade solution from the ground up. If needed, Comyno can also develop additional customised tools for any client’s specific requirements if they are currently not available on our existing platform.
We combine strategic consulting with state of the art technology to really focus on each and every client individually, which would not be possible without the use of the latest IT technology.
By using this technology, data is available from all of the above-mentioned areas on the digital C-ONE platform.
This enables the clients to reshuffle the existing data in any possible way and not only extract several reports but also develop their own user interfaces.
It also allows white labelling—meaning a bank could invite, for example, their buy-side clients to also log in to the platform to manage their trading and collateral management needs.
Furthermore, C-ONE provides a tailor-made hosted solution with the front end, middle- and back office functionality at a reasonable cost for our clients. The adaptor-based new platform technology, C-ONE, does not need the programming and maintenance that is necessary for thousands of other interfaces and existing in-house systems.
Finally, the optional cloud-based environment enables the clients to avoid investing in additional hardware infrastructure and allows secure external data storage and processing.
This is what we at Comyno understand as the digital future of the securities finance industry.
In today’s digital age, competition is rapidly increasing through the creation of platforms and networks which offer straight-through processing, connectivity and distributed ledger technologies (DLTs).
Nowadays, the ultimate advantage over the competition is achieved by building a better platform and offering full connectivity to other trading platforms and systems, rather than continuing the use of existing outdated product suites.
In light of the need for transparency driven by the new regulatory reporting requirements such as the Securities Financing Transactions Regulation (SFTR)—among others—many market participants, regardless of being big or small, are burdened by the need to break off silos and fulfil all regulatory requirements. However, new reporting requirements should not only be seen as additional operational efforts. They, in fact, increase transparency not only towards the regulators but also towards senior management within their own organisation. This new transparency should be used to better manage inventory, client relationships and risk.
After the financial crisis banks, brokers and asset managers have spent a lot of time, efforts and money reorganising their businesses, to introduce new business models, modernise their IT infrastructure and use new technologies to bring the best solutions and products to the market.
However, these strategic investments have often led to a jumble of old systems, knowledge, processes, and corporate cultures.
At the same time, new digital companies are entering the market without legacy issues and with a new digital approach to today’s markets and regulatory challenges. As a result of the old system infrastructure, digital platforms and DLTs have been introduced to the market to handle the increased volumes of data more efficiently, quicker and cheaper with a variety of connectivity options to communicate with other IT systems.
In general, a digital platform creates a combined development and delivery environment that provides users with consistent, accurate and timely data. A data management platform imports data from many systems and enables customers to view the data in a consistent manner. On top, DLT provides the technological infrastructure and protocols that allow simultaneous access, validation and record updating in an immutable manner across a network spread across multiple entities or locations—blockchain is a special form of the DLT.
Comyno has taken this forward-thinking approach even a step further to create a digital securities finance trading platform, called C-ONE. This platform combines trading, data management technologies and data analytic tools into a single software suite with an intuitive and easy-to-navigate customised dashboard/cockpit incorporating DLT and providing almost unlimited connectivity to other systems, platforms and data services.
With its plug and play technology, Comyno provides variations of such trading and analytic tools as:
• C-One Trading
• C-One Collateral
• C-One Risk Management
• C-One Reporting
• C-One Allocation tools (for example, fairness algorithms for the automated allocation of fund inventory to trade requests)
The tools can be designed for the clients solely based on their respective requirements because the aforementioned technologies allow a fully automated and customised product.
A key role of the new technology used for the C-ONE platform is to collect structured and unstructured data from a range of internal and external sources and to then integrate and store that data in a private or public cloud. The digital platform also analyses and organises data to provide insight and tailor-made reporting to data-driven parts of the business, such as securities finance trade, risk or counterparty analysis.
The data incorporated into the platform can be first-party data, coming from an organisation’s own applications, systems, websites and products, as well as second-party data from the outside world which is needed to add all necessary information to the record. In addition, platforms use third-party data to fill in gaps in a company’s own data environment.
Subsequently, Comyno’s approach has always been to provide a proficient tailor-made securities finance platform that combines the client’s specific business and reporting requirements with the necessary connectivity of the platform.
C-ONE connects almost any existing clearing house, tri-party agent, central counterparty (CCP) and other IT system solutions for in-house trading systems in the securities finance world.
By building a digital platform, one party can easily connect its business with another party by using fully automated straight-through processing to connect products and services, co-create value, minimise errors arising from manual tasks (such as dual entries) and save costs overall.
This ability to ‘plug-and-play’ is the defining characteristic of ‘digital platform thinking’ by Comyno and has resulted in the development of our C-ONE platform.
The digital approach is already a trend in many other industries, where one can see more and more companies shifting from products to platforms. In the securities finance industry, Comyno has already taken the next step to support that trend for the buy- as well as the sell side.
Most of the competing ‘traditional’ securities finance systems currently available on the market, offer a rather standardised securities finance product suite which comes at a high cost, licensing fees as well as complex interfaces and still cannot satisfy the heterogeneous needs of the market participants.
Unlike these systems, the Comyno C-ONE platform will offer customised adaptors and functionality available as specific tools as well as single products, which can stand alone or be combined in any possible way.
The clients will always decide based on their own business requirements and budget, which combination of tools, products, connectivity adaptors and other services they will need to build their own personalised C-ONE platform.
In addition, Comyno offers independent strategic advice to find the right business and IT strategy and helps to manage the implementation of the respective tools and/or the digital platform itself. The client has the freedom to either integrate C-ONE and/or the required tools into its existing infrastructure or to implement a completely new tailormade solution from the ground up. If needed, Comyno can also develop additional customised tools for any client’s specific requirements if they are currently not available on our existing platform.
We combine strategic consulting with state of the art technology to really focus on each and every client individually, which would not be possible without the use of the latest IT technology.
By using this technology, data is available from all of the above-mentioned areas on the digital C-ONE platform.
This enables the clients to reshuffle the existing data in any possible way and not only extract several reports but also develop their own user interfaces.
It also allows white labelling—meaning a bank could invite, for example, their buy-side clients to also log in to the platform to manage their trading and collateral management needs.
Furthermore, C-ONE provides a tailor-made hosted solution with the front end, middle- and back office functionality at a reasonable cost for our clients. The adaptor-based new platform technology, C-ONE, does not need the programming and maintenance that is necessary for thousands of other interfaces and existing in-house systems.
Finally, the optional cloud-based environment enables the clients to avoid investing in additional hardware infrastructure and allows secure external data storage and processing.
This is what we at Comyno understand as the digital future of the securities finance industry.
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