Rainmakers
30 March 2021
Rob Verrillo, CEO of ConneXXion Markets, updates SFT on where the electronic repo platform fits into the modern financing landscape to provide much-needed liquidity amid regulatory and macro market constraints
Image: metamorworks/stock.adobe.com
The repo market is pivotal to the efficient working of almost all financial markets. Where does ConneXXion Markets fit in?
ConneXXion Markets provides solutions for the electronification of front-to-back repo trading and has the principal objective of adding enhanced liquidity to that currently available to most market participants. This is done via unique, bespoke, but complementary protocols.
As seasoned industry practitioners what does your experience tell us about challenges facing the industry right now and would diminishing liquidity pools be one of them?
Certainly the market is facing challenges with regards to regulation, compliance and reporting resulting in diminishing traditional liquidity pools. Quantitative easing and other central bank interventions have given the temporary illusion of an abundance of liquidity provision; we suspect that as these are phased out the same problems will resurface.
What regulations are causing the most problems throughout the market?
The biggest challenge for the market, and the primary cause of the decline in traditional market liquidity, is the tidal wave of regulations such as Basel III, the second Markets in Financial Instruments Directive, the US Dodd-Frank Act, the Securities Financing Transactions Regulation and Fundamental Review of the Trading Book, imposed upon financial systems worldwide, both before and since the Global Financial Crisis.
Where does your solution fit in and what does it currently offer?
We have been driven by the challenges facing our clients, so our initial focus is on bringing additional, sustainable liquidity to buy-side market participants. We are live, building volume and helping forward looking clients access additional sources of liquidity and improve performance.
Providing an electronified solution – can it reduce operational risk and can it increase efficiency?
Absolutely, the electronification of processes eliminates many potential manual booking errors, provides matching unique transaction identifiers to both sides of a transaction, gives the user complete control of his risk exposure (by counterparty, ISIN/CUSIP, term of transaction etc), can provide straight-through processing for post-trade instructions, helps to ticks boxes for best price execution and provides oversight and reporting electronically. All issues ConneXXion Markets has been designed to help solve.
What markets globally are you looking to tap into?
Our initial clients are focussed on domestic GBP, so naturally that is where our current efforts are focussed. The solution has however been designed to provide electronification to a wide range of collateral, across all currencies and we will soon be operational in USD and EUR markets.
You provide simple and cost effective ‘One Touch’ documentation and operational onboarding to remove complexity, how does this work? And have you hit any hurdles with this?
In essence our ‘one-touch’ documents allow clients to on-board multiple legal entity identifiers without having to negotiate multiple agreements per counterparty — this saves considerable resources on all sides.
Hurdles, no. In fact our clients are exceptionally happy with this solution and the results it delivers.
Cloud-based systems used to face a lot of objections from a security perspective but are becoming more mainstream now, has COVID-19 and WFH helped this become the norm?
I think it is now clear that secure, cloud-based solutions provide a better solution than was available previously and are the way forward. They have proven reliability, are far easier to on-board technically, are easily scalable, and provide the absolute best in terms of security.
I believe the market largely understood that before COVID-19 and the requirement to work from home but this unique period may well have accelerated the push for systems and solutions that are accessible from anywhere in real time.
What other challenges have you had to face in getting the platform to the market?
COVID-19 had a short-term impact as many of our clients were initially focussed on replicating their operations from home, which required considerable resources early on. However, this was successfully implemented and we saw engagement levels return equally quickly.
The COVID-19 crisis brought into focus several of the issues ConneXXion Markets has been built to solve for. Equally, the market has had to adapt, and we formally went live during this difficult period.
ConneXXion Markets provides solutions for the electronification of front-to-back repo trading and has the principal objective of adding enhanced liquidity to that currently available to most market participants. This is done via unique, bespoke, but complementary protocols.
As seasoned industry practitioners what does your experience tell us about challenges facing the industry right now and would diminishing liquidity pools be one of them?
Certainly the market is facing challenges with regards to regulation, compliance and reporting resulting in diminishing traditional liquidity pools. Quantitative easing and other central bank interventions have given the temporary illusion of an abundance of liquidity provision; we suspect that as these are phased out the same problems will resurface.
What regulations are causing the most problems throughout the market?
The biggest challenge for the market, and the primary cause of the decline in traditional market liquidity, is the tidal wave of regulations such as Basel III, the second Markets in Financial Instruments Directive, the US Dodd-Frank Act, the Securities Financing Transactions Regulation and Fundamental Review of the Trading Book, imposed upon financial systems worldwide, both before and since the Global Financial Crisis.
Where does your solution fit in and what does it currently offer?
We have been driven by the challenges facing our clients, so our initial focus is on bringing additional, sustainable liquidity to buy-side market participants. We are live, building volume and helping forward looking clients access additional sources of liquidity and improve performance.
Providing an electronified solution – can it reduce operational risk and can it increase efficiency?
Absolutely, the electronification of processes eliminates many potential manual booking errors, provides matching unique transaction identifiers to both sides of a transaction, gives the user complete control of his risk exposure (by counterparty, ISIN/CUSIP, term of transaction etc), can provide straight-through processing for post-trade instructions, helps to ticks boxes for best price execution and provides oversight and reporting electronically. All issues ConneXXion Markets has been designed to help solve.
What markets globally are you looking to tap into?
Our initial clients are focussed on domestic GBP, so naturally that is where our current efforts are focussed. The solution has however been designed to provide electronification to a wide range of collateral, across all currencies and we will soon be operational in USD and EUR markets.
You provide simple and cost effective ‘One Touch’ documentation and operational onboarding to remove complexity, how does this work? And have you hit any hurdles with this?
In essence our ‘one-touch’ documents allow clients to on-board multiple legal entity identifiers without having to negotiate multiple agreements per counterparty — this saves considerable resources on all sides.
Hurdles, no. In fact our clients are exceptionally happy with this solution and the results it delivers.
Cloud-based systems used to face a lot of objections from a security perspective but are becoming more mainstream now, has COVID-19 and WFH helped this become the norm?
I think it is now clear that secure, cloud-based solutions provide a better solution than was available previously and are the way forward. They have proven reliability, are far easier to on-board technically, are easily scalable, and provide the absolute best in terms of security.
I believe the market largely understood that before COVID-19 and the requirement to work from home but this unique period may well have accelerated the push for systems and solutions that are accessible from anywhere in real time.
What other challenges have you had to face in getting the platform to the market?
COVID-19 had a short-term impact as many of our clients were initially focussed on replicating their operations from home, which required considerable resources early on. However, this was successfully implemented and we saw engagement levels return equally quickly.
The COVID-19 crisis brought into focus several of the issues ConneXXion Markets has been built to solve for. Equally, the market has had to adapt, and we formally went live during this difficult period.
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