Comyno delivers securities finance innovation in SFTR and beyond
03 July 2020
Frank Becker offers a comprehensive overview of Comyno’s multi-faceted offerings including its SFTR suite and plans for expansion into DLT
Image: Triff/shutterstock.com
Comyno is a specialised fintech company with more than 15 years of experience in securities finance, focusing on software and consulting. We work with leading private and public financial institutions, clearinghouses and triparty agents, combining our expertise in strategy, processes and technology.
We have extensive experience in the provision of standardised and tailor-made solutions, increasing functionality and efficiency across the entire value chain. Our innovative strength is not only demonstrated by developing solutions for topics such as the Securities Financing Transactions Regulation (SFTR) but also by our expertise in the area of distributed ledger technology (DLT)/blockchain and its practical application.
What do we offer?
• Consulting Services
• Strategic Consulting
• Project & Program Management
• Business Analysis & Consulting
• Technical & Infrastructure Consulting
• Product Architecture & Design
Software solutions
• C-ONE Securities Finance platform: a suite built to deliver straight-through-processing for all securities finance business activities
• C-ONE Connectivity: standard connectivity to systems and service providers in Securities Finance
• C-ONE SFTR: regulatory reporting solutions
• Customised software development
• DLT/blockchain development
• Rich front-to-back, state-of-the-art suite of software modules
Increasing efficiency across the entire securities finance process and value chain has always been one of the industry’s main challenges, even more so within the fragmented and complex framework of most market participants. This has also been highlighted again in the recent period of increased market volatility. Our C-ONE platform addresses many of these challenges. Essentially, it is a highly flexible set of modules that can seamlessly be integrated into existing legacy infrastructure. Its front end can, yet does not have to be used. This is a vital advantage for any market participant successfully operating with a legacy front office system. Comyno provides various tools, such as C-ONE Collateral, C-ONE Trading, C-ONE Risk Management and C-ONE reporting, which can be easily expanded in a quasi-plug-and-play manner, once the first component is established (See Figure 1, overleaf).
Figure 1: C-ONE Securities Finance Solutions
Hence, C-ONE combines management technologies and data analytics tools into a single software suite with an intuitive and easy-to-navigate customised dashboard/cockpit (See Figure 2, overleaf) A dedicated data management platform, C-ONE Connectivity, imports data from various systems and enables customers to view the data in a clear and concise manner. It effectively serves as a data warehouse hub with the ability to receive and send data.
Figure 2: Line graph screenshot
This range of tools give our clients the ability to cover all securities finance-related topics as efficiently as possible. A key role of the C-ONE platform is the collection of both structured and unstructured data from a range of internal and external sources and its subsequent integration and storage.
Furthermore, it provides a tailor-made hosted solution with front end, middle and back-office functionality at a reasonable cost for our clients. With the adaptor-based new platform technology, C-ONE does not need the programming and maintenance that is necessary for the broad range of other interfaces and existing in-house systems.
Looking at our SFTR solutions in particular, we’ve had a broad range of user institutions in mind when developing our set of solutions. They range from fully-fledged SFTR capabilities to a scaled-back approach for institutions that don’t have the need for all functionality offered through a fully-fledged solution.
Comprehensive and powerful SFTR module
The SFTR module includes system-level data extracts from C-ONE, through to unique transaction identifier (UTI) generation, matching and direct reporting to trade repositories. Customers are able to take advantage of Comyno’s unified solution for all of their SFTR requirements. They will also have the option of a modular solution that can be combined with other third-party reporting platforms as required.
C-ONE SFTR reporting is based on a highly extensible Java and web-based client-server architecture, a relational database system and standard interfaces. This optimised IT infrastructure makes transactions a platform-independent, multi-tenant and scalable software that can be easily adapted or enhanced, both technically and functionally, and smoothly integrated into complex system landscapes.
C-ONE SFTR’s features are:
• Comprehensive user role concept for access authorisation management
• Flexible connection to multiple source systems
• Consistency check of input data with configurable error levels
• Option to make manual corrections, for example in case of consistency errors or “rejects”
• Results data presentation for SFTR data elements
• Internal portfolio reconciliation with additional functionalities (difference report, proposed transactions) as well as identification of report-relevant transactions including relevance report
• Functional validation according to specified rules of the report recipient
• Generation of the submission files, including technical XSD schema validation (XML files)
• Import and allocation of feedback notification from the trade repository
• Flexibility in the process management via the cockpit, the process menu or automatically via batch scripts
• Easy generation of several views/layouts
• “Golden copies“ functionality with multiple options to support an audit-proof correction process
• Historical view (historical course of trades across a defined reporting period)
• Analytical tools
• Delegated reporting (e.g. client reporting)
• Various data delivery options and import and export functionality for tables (XML, CSV and XLSX)
• Audit-compliance (extensive logging of manual changes)
• Archiving functionality
• See C-ONE SFTR Reporting/Flash Screen (Figure 3, overleaf).
Figure 3: Datalog screenshot
As we all know, one size doesn’t fit all. We’ve acknowledged this by also having developed a slimmer version of our SFTR module.
Pragmatic and cost-efficient solution for SFTR compliance
In addition to the fully-fledged SFTR module, which is fully integrated into the C-ONE suite of systems, we developed C-ONE SFTRLite. The idea was to facilitate the requirements for companies which already have a strong database for its securities finance business and prefer a light technological footprint to meet the regulatory requirements or have the data spread across multiple systems. SFTRLite was created to support customised data imports, validation and adjustment of the provided data and converting it into the required XML schema, so it is ready to be reported to a trade repository. See C-ONE SFTRLite Reporting Screens (Figure 4).
Figure 4: SFTR task window screenshot
Last but not least, one of our focus areas has been a DLT based initiative aiming for significant benefits across the entire securities finance value chain.
A new dimension custody network using blockchain technology
Both parts of traditional securities finance transactions, principal and collateral, continue to be scattered across custodians and international central securities depositories (I)(CSD), with significant issues arising from moving them quickly and efficiently from where they are to where they are needed. The current crisis reinforces the need for revolutionary technology.
Blockchains as one form of DLT have been seen as a potential solution. More specifically, the concept of blockchain-based securities settlement has been floating around ever since blockchain, respectively DLT, has been around. That said, the reluctance by many market participants to challenge the established custody model has been underestimated. This explains to an extent why tokenisation using a blockchain-based custodian has not gained any traction yet. We share the belief that the real viable solution is not tokenisation, but on-chain transfers and position keeping.
As Comyno was expanding its technological capabilities on blockchain and DLT over the past few years, we were well placed to get deeply involved in an initiative led by DekaBank, aptly named the Digital Collateral Protocol (DCP). As indicated above, its key element is not tokenisation, but the creation of a common and joined settlement and custody protocol for the transfer of traditional securities. Crucially, it allows securities to be kept at their original custodian and the central securities depository.
This is achieved through the transfer of the settlement chain onto the DCP. The settlement itself occurs within seconds directly between the participating custodians in a digital representation, exactly as they are today but without the physical settlement. We are convinced that this will be a breakthrough in terms of combining legacy settlement infrastructure and modern technology.
This in turn should lead to tangible operational and technological improvements and will hence free up resources for all involved stakeholders. The efficiencies lay in a multitude of areas bringing benefits from several aspects due to the fast and certain settlement:
• Easy expansion of trading relationships through a scalable, transparent and unified settlement network
• Improved balance sheet efficiency due to reduced counterparty risk
• Reduced business risk due to increased settlement efficiency leading to reduced buy in risks and fines
• Increased operational efficiency by simple, instantaneous and straightforward settlement, hence decreased knock-on effects across the process chain
• Reduced settlement costs due to a smaller number of intermediaries for international activities
• The project is at an advanced stage, having successfully completed all stages through to an alpha version. The initial use case is position keeping and securities settlement, initiated by the securities loan and non-cash collateral transfer. In other words, the DCP is now close to being in a position to book a collateralised securities lending transaction. The first legally binding trade on the DCP is expected in the near future.
Discussions are held with a large number of leading international and European custodians on the operating model for the DCP, discussing potential legal issues and their solutions, as well as the feasibility to implement this on an international scale.
With all this already achieved and close to production, we’ve gone even one step further and already enabled C-ONE Connectivity to integrate the DCP into the existing C-ONE technology suite and act as the interface into the DCP. C-ONE incorporates total connectivity via a message bus facility to every internal and external system or third-party entity. It can hence be used to link the existing internal technology landscape to the new technology without building own interfaces into the DLT.
It needs to be emphasised that the DCP is an initiative with a shared goal for all securities finance stakeholders, and a win-win constellation for the most part. There has been widespread interest across the securities finance industry with the aim to get the DCP fully operational as soon as possible. We couldn’t be more excited by the combination of forces and would be happy to engage in any form of dialogue to strengthen and extend the DCP network on a global basis.
To round things off, we at Comyno are excited to play a part in the digitisation of securities finance.
Regarding the outlook for SFTR, it looks as if most market participants continue to work hard on their readiness to report. Needless to say, the buy-side continues to have a bit more headroom to work on any open points. That said, we expect teething issues with chosen solutions and approaches, as well as matching quota come go-live. We will be more than happy to assist in any such challenge, from both a technological and consulting perspective.
We have extensive experience in the provision of standardised and tailor-made solutions, increasing functionality and efficiency across the entire value chain. Our innovative strength is not only demonstrated by developing solutions for topics such as the Securities Financing Transactions Regulation (SFTR) but also by our expertise in the area of distributed ledger technology (DLT)/blockchain and its practical application.
What do we offer?
• Consulting Services
• Strategic Consulting
• Project & Program Management
• Business Analysis & Consulting
• Technical & Infrastructure Consulting
• Product Architecture & Design
Software solutions
• C-ONE Securities Finance platform: a suite built to deliver straight-through-processing for all securities finance business activities
• C-ONE Connectivity: standard connectivity to systems and service providers in Securities Finance
• C-ONE SFTR: regulatory reporting solutions
• Customised software development
• DLT/blockchain development
• Rich front-to-back, state-of-the-art suite of software modules
Increasing efficiency across the entire securities finance process and value chain has always been one of the industry’s main challenges, even more so within the fragmented and complex framework of most market participants. This has also been highlighted again in the recent period of increased market volatility. Our C-ONE platform addresses many of these challenges. Essentially, it is a highly flexible set of modules that can seamlessly be integrated into existing legacy infrastructure. Its front end can, yet does not have to be used. This is a vital advantage for any market participant successfully operating with a legacy front office system. Comyno provides various tools, such as C-ONE Collateral, C-ONE Trading, C-ONE Risk Management and C-ONE reporting, which can be easily expanded in a quasi-plug-and-play manner, once the first component is established (See Figure 1, overleaf).
Figure 1: C-ONE Securities Finance Solutions
Hence, C-ONE combines management technologies and data analytics tools into a single software suite with an intuitive and easy-to-navigate customised dashboard/cockpit (See Figure 2, overleaf) A dedicated data management platform, C-ONE Connectivity, imports data from various systems and enables customers to view the data in a clear and concise manner. It effectively serves as a data warehouse hub with the ability to receive and send data.
Figure 2: Line graph screenshot
This range of tools give our clients the ability to cover all securities finance-related topics as efficiently as possible. A key role of the C-ONE platform is the collection of both structured and unstructured data from a range of internal and external sources and its subsequent integration and storage.
Furthermore, it provides a tailor-made hosted solution with front end, middle and back-office functionality at a reasonable cost for our clients. With the adaptor-based new platform technology, C-ONE does not need the programming and maintenance that is necessary for the broad range of other interfaces and existing in-house systems.
Looking at our SFTR solutions in particular, we’ve had a broad range of user institutions in mind when developing our set of solutions. They range from fully-fledged SFTR capabilities to a scaled-back approach for institutions that don’t have the need for all functionality offered through a fully-fledged solution.
Comprehensive and powerful SFTR module
The SFTR module includes system-level data extracts from C-ONE, through to unique transaction identifier (UTI) generation, matching and direct reporting to trade repositories. Customers are able to take advantage of Comyno’s unified solution for all of their SFTR requirements. They will also have the option of a modular solution that can be combined with other third-party reporting platforms as required.
C-ONE SFTR reporting is based on a highly extensible Java and web-based client-server architecture, a relational database system and standard interfaces. This optimised IT infrastructure makes transactions a platform-independent, multi-tenant and scalable software that can be easily adapted or enhanced, both technically and functionally, and smoothly integrated into complex system landscapes.
C-ONE SFTR’s features are:
• Comprehensive user role concept for access authorisation management
• Flexible connection to multiple source systems
• Consistency check of input data with configurable error levels
• Option to make manual corrections, for example in case of consistency errors or “rejects”
• Results data presentation for SFTR data elements
• Internal portfolio reconciliation with additional functionalities (difference report, proposed transactions) as well as identification of report-relevant transactions including relevance report
• Functional validation according to specified rules of the report recipient
• Generation of the submission files, including technical XSD schema validation (XML files)
• Import and allocation of feedback notification from the trade repository
• Flexibility in the process management via the cockpit, the process menu or automatically via batch scripts
• Easy generation of several views/layouts
• “Golden copies“ functionality with multiple options to support an audit-proof correction process
• Historical view (historical course of trades across a defined reporting period)
• Analytical tools
• Delegated reporting (e.g. client reporting)
• Various data delivery options and import and export functionality for tables (XML, CSV and XLSX)
• Audit-compliance (extensive logging of manual changes)
• Archiving functionality
• See C-ONE SFTR Reporting/Flash Screen (Figure 3, overleaf).
Figure 3: Datalog screenshot
As we all know, one size doesn’t fit all. We’ve acknowledged this by also having developed a slimmer version of our SFTR module.
Pragmatic and cost-efficient solution for SFTR compliance
In addition to the fully-fledged SFTR module, which is fully integrated into the C-ONE suite of systems, we developed C-ONE SFTRLite. The idea was to facilitate the requirements for companies which already have a strong database for its securities finance business and prefer a light technological footprint to meet the regulatory requirements or have the data spread across multiple systems. SFTRLite was created to support customised data imports, validation and adjustment of the provided data and converting it into the required XML schema, so it is ready to be reported to a trade repository. See C-ONE SFTRLite Reporting Screens (Figure 4).
Figure 4: SFTR task window screenshot
Last but not least, one of our focus areas has been a DLT based initiative aiming for significant benefits across the entire securities finance value chain.
A new dimension custody network using blockchain technology
Both parts of traditional securities finance transactions, principal and collateral, continue to be scattered across custodians and international central securities depositories (I)(CSD), with significant issues arising from moving them quickly and efficiently from where they are to where they are needed. The current crisis reinforces the need for revolutionary technology.
Blockchains as one form of DLT have been seen as a potential solution. More specifically, the concept of blockchain-based securities settlement has been floating around ever since blockchain, respectively DLT, has been around. That said, the reluctance by many market participants to challenge the established custody model has been underestimated. This explains to an extent why tokenisation using a blockchain-based custodian has not gained any traction yet. We share the belief that the real viable solution is not tokenisation, but on-chain transfers and position keeping.
As Comyno was expanding its technological capabilities on blockchain and DLT over the past few years, we were well placed to get deeply involved in an initiative led by DekaBank, aptly named the Digital Collateral Protocol (DCP). As indicated above, its key element is not tokenisation, but the creation of a common and joined settlement and custody protocol for the transfer of traditional securities. Crucially, it allows securities to be kept at their original custodian and the central securities depository.
This is achieved through the transfer of the settlement chain onto the DCP. The settlement itself occurs within seconds directly between the participating custodians in a digital representation, exactly as they are today but without the physical settlement. We are convinced that this will be a breakthrough in terms of combining legacy settlement infrastructure and modern technology.
This in turn should lead to tangible operational and technological improvements and will hence free up resources for all involved stakeholders. The efficiencies lay in a multitude of areas bringing benefits from several aspects due to the fast and certain settlement:
• Easy expansion of trading relationships through a scalable, transparent and unified settlement network
• Improved balance sheet efficiency due to reduced counterparty risk
• Reduced business risk due to increased settlement efficiency leading to reduced buy in risks and fines
• Increased operational efficiency by simple, instantaneous and straightforward settlement, hence decreased knock-on effects across the process chain
• Reduced settlement costs due to a smaller number of intermediaries for international activities
• The project is at an advanced stage, having successfully completed all stages through to an alpha version. The initial use case is position keeping and securities settlement, initiated by the securities loan and non-cash collateral transfer. In other words, the DCP is now close to being in a position to book a collateralised securities lending transaction. The first legally binding trade on the DCP is expected in the near future.
Discussions are held with a large number of leading international and European custodians on the operating model for the DCP, discussing potential legal issues and their solutions, as well as the feasibility to implement this on an international scale.
With all this already achieved and close to production, we’ve gone even one step further and already enabled C-ONE Connectivity to integrate the DCP into the existing C-ONE technology suite and act as the interface into the DCP. C-ONE incorporates total connectivity via a message bus facility to every internal and external system or third-party entity. It can hence be used to link the existing internal technology landscape to the new technology without building own interfaces into the DLT.
It needs to be emphasised that the DCP is an initiative with a shared goal for all securities finance stakeholders, and a win-win constellation for the most part. There has been widespread interest across the securities finance industry with the aim to get the DCP fully operational as soon as possible. We couldn’t be more excited by the combination of forces and would be happy to engage in any form of dialogue to strengthen and extend the DCP network on a global basis.
To round things off, we at Comyno are excited to play a part in the digitisation of securities finance.
Regarding the outlook for SFTR, it looks as if most market participants continue to work hard on their readiness to report. Needless to say, the buy-side continues to have a bit more headroom to work on any open points. That said, we expect teething issues with chosen solutions and approaches, as well as matching quota come go-live. We will be more than happy to assist in any such challenge, from both a technological and consulting perspective.
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