Neil Barua, chief executive at IPC Systems, said the private cloud provider for financial services firms has experienced a 400% increase in the number of compliance proposals in Europe in the past year.

The demand for compliance technology has increased as MiFID II, new rules covering European financial markets, come into effect in 2018. Today the European Council approved a one-year delay to MiFID II from its original implementation date to 3 January 2018. The deadline for the member states to transpose MiFID II into national legislation is 3 July 2017. Barua told Markets Media: “MiFID II is coming like a freight train.”

In February IPC Systems completed its acquisition of Etrali Trading Solutions, which specialises in compliance. Lionel Grosclaude, the former chief executive of Etrali, joined IPC as managing director of Europe, Middle East and Africa to lead a newly created compliance business division.

“The financial industry is undergoing an amazing transformation,” Barua added. “In the next three, five to 10 years technology will be at the forefront of that change.”

IPC provides a financial markets private cloud to more than 6,000 clients across all asset classes. Barua said the firm is keen on forming partnerships with firms that provide serves for its clients, including new fintech firms. “The partnership with Algomi is a great example,” he added.

Last month IPC announced a partnership with Algomi, the fintech company that provides a bond information network.Voice calls can be tagged directly to trades to provide audit trails for the best execution requirements under MiFID II. Stu Taylor, chief executive of Algomi, told Markets Media at the time: “Our deal with IPC means the buyside can connect to a salesperson with just one click using DealCall.”

Consultancy GreySpark Partners said in a note that delays in the publication of all the Regulatory Technical Standards for MiFID II have led to financial markets companies thinking holistically when making technology upgrade decisions designed to assist with the compliance overhead, the opposite to what has usually happened in the past.

The note said: “As a result, many companies are replacing legacy, siloed data management, data processing, risk management, reporting, compliance and client-facing systems with new, streamlined solutions that are better designed to manage the reams of proprietary internal and client-centric data across the organisation.”

The consultancy gave the example of a Tier 1 bank which recently replaced multiple reporting systems per business line with one, cross-organisational data warehouse and a fully customisable reporting engine. In addition a large asset management firm replaced a spreadsheet-based trade cost reporting process with an automated, integrated, MiFID II-proof system.

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In a move that marks a milestone in the evolution of its market strategy, IPC Systems, Inc., a leading global provider of secure, compliant communications and networking solutions for the financial markets community, announced its launch of Connexus Cloud.

This innovation progresses one of the industry’s largest secure encrypted communications platforms connecting IPC’s community of 200,000 users across 6,000 market participant locations in 700 cities. “Connexus Cloud is the foundation of IPC’s strategy to move the financial markets into a new era with an intuitive, robust and all-encompassing cloud delivery model. Its secure, compliant high performance design is purpose-built to be a new standard. We are continually expanding our collaborative ecosystem of data and voice resources exclusively for the financial markets community,” said Neil Barua, CEO of IPC.

“Connexus Cloud is the foundation of IPC’s strategy to move the financial markets into a new era with an intuitive, robust and all-encompassing cloud delivery model. Its secure, compliant high performance design is purpose-built to be a new standard. We are continually expanding our collaborative ecosystem of data and voice resources exclusively for the financial markets community,” said Neil Barua, CEO of IPC. Algomi, the network providing information-matching solutions for the optimisation of fixed income liquidity, is one of IPC’s first Connexus Cloud partners. Furthermore,

Algomi, the network providing information-matching solutions for the optimisation of fixed income liquidity, is one of IPC’s first Connexus Cloud partners. Furthermore, Algomi’s DealCall, on the award-winning Honeycomb platform, is designed to enable IPC’s Connexus Cloud users to swiftly and securely connect to their dealers.

“Financial institutions continue to migrate from on-premise solutions to embrace cloud-based models for infrastructure flexibility. The on-demand access Connexus Cloud provides to our expanding portfolio of IPC and IPC-certified partner products, services and solutions, will foster a growing, dynamic community and the next wave of industry advancements,” Barua added.

IPC’s Connexus Cloud will deliver an enhanced lineup of IPC products including communications-as-a-service and information management for compliance solutions through an on-demand and anywhere user interaction model. The Connexus Cloud Partner programme will offer innovative applications to the financial markets community allowing members to interact securely, exchange information and mitigate risk. IPC plans to announce a number of additional Connexus Cloud partners and products in 2016.

New 10-year partnership to develop pan-European MTF for bond trading, powered by Algomi technology and operated by Euronext.

Earlier this month, pan-European exchange operator Euronext announced a new partnership with bond trading technology vendor Algomi to develop a new multilateral trading facility (MTF) for the fixed-income market. Algomi CTO Usman Khan talks to John Brazier about the vendor’s role in the project.

The electronic bond trading space has so far been something of a conundrum: Everyone wants to be involved but few have overcome the transition from voice-based trades, while many still prefer to use the old, more human, approach to the newer electronic platforms.

Global bond trading values stand around the $87 trillion mark, although recent political events have taken a serious toll; $1 trillion was wiped off the market by November 14, according to Bank of America, in reaction to Donald Trump’s presidential victory.

New venues have proliferated in this space as collaborative efforts come to the fore with new ideas. Exchange operator Euronext has announced a new joint-partnership with fixed-income vendor Algomi to develop and launch a new MTF. Its aim is to become a centralized marketplace for pan-European corporate bond trading and Euronext has bankrolled the project at an investment of $2.3 million, aiming to launch next year.

London-based Algomi has made it a specific mission to tackle the historic difficulties that have plagued fixed-income trading and related liquidity due to a lack of information availability, rolling out its flagship Honeycomb network, and in August this year, making its information-matching platform Synchronicity available on a software-as-a-service (SaaS) basis.

Usman Khan, CTO at Algomi, tells WatersTechnology that while the vendor will be providing the platform’s technology, it does not mean a fundamental change to the business.

“Algomi is not becoming an execution venue and we never will be; we are not becoming regulated or taking positions of risk or anything similar,” he says. “Euronext is now expanding into this type of bond matching and the partnership with Aglomi is to set up an interdealer network that connects banks so they can find bond matching opportunities between each other.”

Sole Provider

As part of the 10-year agreement, Algomi will deliver the technology upon which the venue will operate, based on a similar project with SIX Swiss Exchange, which was undertaken early last year.

Algomi will supply an internally developed exchange-grade bond-matching solution to provide the functionality required for algorithmic smart matching to create an auction between dealers. The idea is that if a bank is unable to match an order coming in from a buy-side trader, it then gets sent to the interdealer exchange where a collaborative approach can find the other side of the deal.

Khan says the vendor will seek to leverage its existing relationships with both buy- and sell-side organizations. It currently counts over 200 buy-side users and 15 global banking institutions among its client base.

“Any bank that uses Synchronicity will automatically, once they have a contractual agreement in place with the Euronext MTF, be able to access that exchange very quickly,” Khan says. “It’s out of the box. We have already connected the exchange-grade technology with our Synchronicity banking technology, which provides enhanced time-to-market for these dealers in a way that no one else can right now.”

Once the platform goes live next year, Khan says Algomi’s role will shift to focus on maintaining the technology involved, implementing any upgrades and scaling alongside increases in volumes. Those upgrades will encompass version 2 of Synchronicity in the first and second quarters of 2017, which will be released in HTML5 and, according to Khan, models exchange behavior in a more efficient manner than the current iteration.

The last major European exchange to tackle the corporate bond market was Deutsche Börse in January 2014, when it took a stake in newly founded bond trading platform Bondcube, which ultimately struggled to gain traction and folded three months after launch in July 2015

“There are definitely people out there who are trying to do similar things, some of whom are looking at building multi-dealer or interdealer exchanges, but I think the use-cases are different,” Khan says. “We have approached our use-cases off the back of how banking clients are using our platform. We realized that sometimes banks are unable to get trades done based on the inquiries they receive from the client because they can’t find the other side, whereas multiple banks working together can often find it.”

It is too early to say whether or not the joint venture between Euronext and Algomi will succeed, but at first glance it looks like tough ask in a marketplace that has become saturated with new entrants and established players alike.

The differentiating factor for the Euronext and Algomi venture will be the technology involved—a specific focus on improved information matching and collaboration, alongside an established buy-side client base sets the project in good stead prior to its entry into the bond arena.

The Bottom Line

• Euronext and Algomi have agreed to a multi-year partnership to develop and launch a new pan-European bond multilateral trading facility (MTF), with technology provided by Algomi, which seeks to increase the availability of pre-trade information through a collaborative approach between banking users.

http://www.waterstechnology.com/exchanges-trading-venues/3048371/euronext-takes-10-million-stake-in-fixed-income-tech-provider

London-based Algomi is on a quest to help solve low levels of liquidity in the bond markets

 

By Tim Cave
November 17, 2016 

Algomi, a London-based fixed income startup, has appointed a co-founder of data giant IHS Markit to its board as it continues its quest to help solve low levels of liquidity in the bond markets.

Rony Grushka has joined Algomi with immediate effect, the company said in a statement on November 17.

Grushka was one of the five founders of Markit – the financial data company led by Lance Uggla that has proved to be one of the City’s great success stories, turning itself from startup into a $5 billion company in less than 15 years.

Grushka held roles such as global head of strategy and chief financial officer, before leading Markit’s flotation on Nasdaq in June 2014. He left the company soon after that IPO. Earlier this year, Markit merged with the Colorada-based data company IHS to form IHS Markit, a company worth more than $13 billion.

In joining Algomi, Grushka will now be offering his advice to another high-profile London startup.

Algomi, which was founded in June 2012 by three former UBS executives including Stu Taylor, provides software designed to help banks find matches for bond trades, by automatically scraping trade histories and new issuance records.

Its major clients include Deutsche Bank, HSBC and Nomura and it is also acting as the technology partner for exchange groups Six Swiss Exchange and Euronext, which are building corporate bond platforms.

It is one of a many initiatives designed to help investors overcome low liquidity in fixed-income markets as new capital rules have forced banks to retreat from the sector.

In March, Tom Glocer, who was the chief executive of Thomson Reuters from 2008 to 2012, became a strategic adviser to Algomi.

Grushka is also a board member of BondIT, a bond portfolio building platform and a governor of the London School of Economics.

With Brexit and Donald Trump’s election victory, who knows what will happen in 2017. Industry experts do their best to give their views on the year to come.

Avoidance of the balance sheet in transactions

James Treseler, global head of cross-asset secured financing, Societe Generale

“The most important feature of tomorrow’s market will be the need for banks to avoid using balance sheet in transactions. This prevailing mandate will impact a wide range of activities not limited to but certainly including securities finance.

“I expect centrally cleared repo and securities lending will gain a solid foothold in the markets for the same reasons that listed derivatives products make sense – lower balance sheets.”

Small-scale adoptions of DLT

Thorsten Peisl, CEO, RISE Financial Technologies

“For financial institutions, 2017 will be the year of small scale adoptions of use-case specific DLT products beyond in-house experimentations based on generic products, often unfit for productive environments. In particular we anticipate more activity around information flows on DLT such as proxy voting. We also expect to see new solutions emerge catering to asset flows, especially OTC traded assets or those which are subject to less stringent regulation.

“For technology providers, 2017 will see a continued trend towards increased openness (open source), the adoption of more open technology architecture principles, and more clarity around how different solutions can interoperate.

“For regulators, 2017 will be a year of greater understanding of the technology and an even higher degree of willingness to engage with solution providers, with a view to setting-up blockchain sandboxes and the publication of guidelines for DLT regulation.”

 The year of uncleared margin rules

Pierre Lebel, head of collateral advisory, prime services, Societe Generale

“If 2016 was the year of the mandatory clearing, 2017 will be the year of the un-cleared margin rules, with mandatory daily variation margin calculation starting 1 March for most non-cleared bilateral OTC derivatives contracts. How the buy-side will cope with challenges such as the cost of the new infrastructures and the rise in operational risk will be one to watch.”

Demands for blockchain results

Lars Ottersgård, EVP and head of market technology, Nasdaq

“In 2017, I predict it will be ‘show me the money’ time for a lot of these projects. In other words, next year will see—hopefully—plenty of implementations of the 2015/2016 innovation projects, particularly the very much publicised blockchain developments. Speaking of which, while blockchain is still very exciting, I think it’s worth mentioning some of the other technologies like cloud and FPGA are also at the forefront of shaping the way the capital markets function, particularly relating to trading and post-trade spheres. We believe that leveraging these technologies together will create some interesting opportunities for competitive gains coming into the New Year. A lot of adoption and new technology development we’re seeing is driven by flexibility, efficiency, time-to-market and the willingness to accept and adopt new technologies to be more competitive and reduce costs.”

Getting to grips with collateral management

Ted Leveroni, chief commercial officer, GlobalCollateral

“Buy-side and sell-side firms facing the March 2017 deadline for the introduction of variation margin rules have two key challenges to overcome. First, the effort required by major swap dealers to comply with highly intricate new initial margin (IM) rules for bilateral OTC derivatives introduced in September means that many market participants are only now getting to grips with the documentation and operational implications of the VM deadline. Second, the workflow-related decisions that firms take in order to achieve compliance in March must be set in the context of the need to reengineer collateral-related processes, perhaps on an enterprise-wide level. A misstep today, could saddle a firm with crippling costs, risks and inefficiencies well into the future.”

New approaches to data

Mahima Gupta, business consultant, Sapient Global Markets

“The sheer scope of MiFID II is going to require greater granularity on source and reference data. For the sake of comparison, the data fields required under EMIR included 20 fields whereas MiFID II is expected to have roughly 65 to 85 fields. Apart from transaction reporting, there are new requirements to report pre-trade information i.e. order/quotes data which may not be always be available in a structured format. There are other complex requirements on generation of best execution reports and reporting of commodity positions. There will also be certain data that firms will have to formularise to new source systems requiring more formal enterprise systems within your organisation.

“As regulators seek more transparency around the parties involved pre- and post-trade, the use of more data identifiers, conduct peer reporting comparisons and look for efficient reconciliation, the need for a comprehensive rethink of how firms are managing data, operational systems, external providers and costs is clear.”

MiFID II to take centre stage

Mark Hemsley, CEO, BATS Europe

“MiFID II will take centre stage as its implementation date of January 2018 moves ever closer. We expect the buy-side to continue to adjust their trading patterns well in advance of the regulation’s implementation date by increasing their volume of block trading, in order to qualify for MiFID II’s large in scale waiver.

“More generally, we expect the trend of the empowerment of the buy-side to continue and this is particularly important in terms of secular trends we are seeing in market structure. The potential Fed rate rise in December along with the Italian referendum and elections in France and Germany next year mean that volatility is likely here to stay and, therefore, we expect that buy-side traders will make use of all of the tools available to search for and execute on liquidity.”

Making use of blockchain in post-trade

Joshua Satten, director of business consulting, Sapient Global Markets

“The challenge is no longer what a firm, or the industry, can do with the technology. Rather, it’s potentially challenging what firms do by dismantling and re-imagining elements of the value chain and the associated infrastructure.

“A trade repository is one potential use case. If you can visualise a trade repository that is real-time and two-way, then it would evolve from something that is inherently batch-processing and reconciliation-based to something that is real-time and more verification or synchronisation-based. Identifiers and other kinds of reference data used in regulatory reporting could also be issued onto a blockchain network to be consumed by end users. That would mean legal entity identifiers (LEI), International Securities Identification Numbers (ISINs) and perhaps instrument reference data would appear on a blockchain, which could then be accessed by firms. This kind of application could mean savings for firms which constantly have to upgrade their reference data platforms.

“While DLT allows us to imagine a world where post trade activity becomes a series of smart transactions, the complexity of these processes means that is still years away from fruition. Instead, 2017 is likely to be a year of more sober development and the delivery of applications, such as those offered by the likes of Chain, Ripple and SETL that further showcase the benefits this technology can provide.”

Embracing technology in fixed income

Stu Taylor, CEO, Algomi

“In terms of trends for 2017, innovation around data, which enables banks to gain better insight into their trading relationships and become smarter, quicker and better able to service their clients is likely to continue next year at an even greater pace. Ultimately, trading tools which match buyers and sellers more efficiently and smartly, without moving the market, will deliver banks and buy-side firms such as asset managers with a competitive advantage.

“While adopting new technology is a continual process, those firms able to harness a business advantage on a cost effective basis will be best placed to thrive. Embracing SaaS is one way in which large financial institutions can achieve this, and is another trend we’d expect to see next year. It removes the need for physical hardware, and has grown sharply in popularity, as IT departments recognise the operational benefits it delivers.

“As MiFID II approaches in Europe, focus on compliance will intensify as firms prepare themselves for the January, 2018 deadline. While adhering to new market rules remains critically important, now more than ever before, financial institutions will need to delicately balance compliance demands with operational efficiencies to ensure business lines continue to generate revenue.”