Great to see David E. Rutter, founder and CEO of R3, on CNBC’s Squawk Box this week, discussing his predictions for blockchain in 2020 and beyond.
Great to see David E. Rutter, founder and CEO of R3, on CNBC’s Squawk Box this week, discussing his predictions for blockchain in 2020 and beyond.
Tradeteq, the electronic trading platform for institutional trade finance, picked up the award for the ‘Best Collaboration Initiative’. The accolade recognises their efforts to work with over 20 banks, financial institutions and trade associations to close the $1.5tn trade finance gap through the Trade Finance Distribution Initiative (TFD Initiative), for which it is the distribution technology provider.
Additionally, Pragma has won the ‘Best Front-Office Initiative’ accolade for its innovative multi-asset, broker-neutral algorithmic execution platform, Pragma360. The platform enables front-office professionals to create a unique algorithmic trading suite under their own corporate brand.
Christoph Gugelmann, CEO of Tradeteq, commented: “Winning this award recognises the transformative change Tradeteq is bringing to the trade finance market. By partnering with some of the leading trade finance banks, we hope to transform this market into one that is operationally efficient, scalable and easily distributable. Through the use of our credit scoring AI and electronic trading platform, the TFD Initiative’s members can boost trade finance distribution and contribute to closing the trade finance gap.”
David Mechner, CEO of Pragma, was extremely pleased to win the award, stating: “In recent years, the front-office has focused on regulators’ calls for more transparency around execution quality and market impact. Winning this award is recognition of Pragma’s efforts to help front office professionals respond to this mandate using the most-advanced trading and execution tools.”
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Tradition, one of the world’s largest interdealer brokers in over-the-counter commodity and financial products, has facilitated the first, brokered AUD/USD cross-currency swap trade using LCH SwapAgent.
The AUD/USD trade was executed between Mitsubishi UFJ Financial Group (MUFG) and another counterparty on 20 November 2019. Tradition’s global presence, market knowledge and connectivity ensured it was the ideal partner to facilitate this trade.
SwapAgent is a service designed to simplify the processing, margining and settlement of non-cleared derivatives. It benefits from LCH’s expertise in serving and managing risk for the cleared Rates and FX derivatives market.
Nathan Ondyak, Global Head of LCH SwapAgent, comments: “Since launching in 2017, customers trading non-cleared derivatives have utilised SwapAgent to gain many of the efficiencies that they have become accustomed to in the cleared market. We are delighted to welcome MUFG as one of our newest members to the service. The completion of the first brokered AUD/USD trade between bilateral counterparties using SwapAgent is an important milestone for participants trading cross-currency swaps.”
Amit Kantaria, Director in the Rates Trading Group at MUFG, EMEA, added: “MUFG is pleased to have been able to participate in the first brokered AUD/USD cross currency swap through SwapAgent. We believe that this is the first step towards an exciting future, and look forward to this evolution of the uncleared derivatives market.”
Mike Hayter, Manager of the cross-currencies broking desk at Tradition, comments: “Tradition is delighted to facilitate the first, brokered bilateral AUD/USD swap trade using LCH SwapAgent. This is a crucial service that improves standardisation, introduces efficiency and reduces operational and credit risk counterparties in the non-cleared derivatives market.”
Limeglass, the financial research innovation company, today announced that J.P. Morgan has invested in the company. Limeglass’s technology automatically analyses the paragraphs in research documents in real-time, taking into account the underlining context and structure. The Limeglass ‘Research Atomisation’ solution uses proprietary rich Natural Language Processing (NLP), AI, machine learning and their comprehensive cross-asset and macro taxonomy to smart-tag each paragraph in context.
Limeglass recently completed J.P. Morgan’s In-Residence Program, which incubates emerging technology companies to develop production-ready solutions solving for critical wholesale banking problems. Limeglass’s technology enables banks to personalise their research product for both internal and external audiences, maximising the value for users and ensuring that the correct research reaches the correct audiences.
Rowland Park, Chief Executive Officer and co-founder of Limeglass, said: “The volume of financial research, and the lack of innovation in how it is delivered, mean that market participants can spend hours searching through their email to find information on the trades they are considering. It is all too easy to miss vital information buried deep in large documents, wasting time and valuable research insights. Limeglass cuts through the noise, providing users with only the relevant paragraphs in their financial research with a simple search.”
Hussein Malik, Head of Transformation & Implementation across Sales & Research at J.P. Morgan, said: “The insights our Research teams produce daily are a huge source of value to our clients. We are continuously investing in technology to help deliver industry-leading content and to help us and our clients further mine that value.”
Simon Gregory, Chief Technology Officer and co-founder of Limeglass, said: “Having worked in research for all my life, I was always surprised at how much research was being missed by users. We looked at the research consumption and distribution workflows from first principles and realised that the document centric approach was limiting access to the content. Using cutting edge technology to analyse the unstructured data in research documents, we’ve created a whole new way for market participants to engage with financial research.”
Wematch, the global multi-asset-class, web-based matching and negotiation platform, has appointed Jack Jeffery as Chairman of its Board.
With more than 35 years’ experience in financial markets, Jack was previously CEO at electronic fixed income platform MTS and also at EBS, the spot FX electronic broking platform. Jack served 11 years at Citigroup, where he was Global Head of FX options.
Jack has previously served on the Bank of England and US Federal Reserve Foreign Exchange committees and hisappointment follows Wematch’s recent funding round, which saw banking titans J.P. Morgan and Société Générale – both users of Wematch – invest in the fintech. There are now 40 banks and more than 750 traders using Wematch’s platform, with more currently onboarding.
Wematch provides technology to transform how traders match, negotiate and manage trades. This brings the audit and control benefits of electronic tools to trading, delivered as web-based software-as-a-service technology. This significantly cuts costs and, enhances the orderly execution of processes for traders, enabling seamless settlement.
Despite the growth and benefits of e-trading, in some markets institutional investors still conduct most of this activity over the phone, or through interdealer brokers. It is estimated that more than 80% of structured products and 80% of FX derivatives are still transacted by voice. To put it into context, the interest rate swaps market is worth $2.1 trillion a day, with more than 70% of that business handled by phone negotiation.
Jack Jeffery, Chairman of Wematch, said: “The Wematch platform represents an extraordinarily significant step forward in the world of inter-bank trading. Its proprietary architecture enables enhanced efficiencies, providing enormous cost benefits as well as improving regulatory compliance. As a neutral platform that is constantly developing to the markets’ needs, Wematch is reshaping the trading market. It is the right product at the right time.
“Having built my career bringing electronic innovation to the capital markets, I am thrilled to be part of a team that is leading such a profound transformation in the market.”
Joseph Seroussi, co-CEO of Wematch, said: “The voice market remains robust and an integral part of the trading process – its continued usage is a demonstration of its fundamental importance to participants’ business. But it is time that traders have the best technological tools to facilitate optimal trading with confidence. Jack Jeffery’s experience will be invaluable to Wematch as we work to bring the benefits of electronic trading’s auditing and transparency to traders across capital markets.”
Gregory Mimoun, co-CEO of Wematch, said: “Jack has an impeccable track record of steering technical innovation across multiple asset classes which have benefited those markets enormously.
“His appointment is a significant vote of confidence in our technology and our business. We are delighted to welcome him to Wematch as we move to the next exciting chapter in our vision to transform trading markets.”
Traditional business models remain under threat across the full value chain as enterprise blockchain continues to gain momentum, according to R3 CEO & Founder, David E Rutter
His comments came during R3’s annual CordaCon event, attended by over 1,100 developers, business leaders and industry experts in the heart of London’s financial district. The event drew a significant increase on previous years.
Since inception four years ago, R3 has risen to become a key player in blockchain-inspired technology to enhance a range of business processes including trade finance, insurance and financial services. R3’s global blockchain ecosystem has now grown to over 350 companies.
Among the announcements at CordaCon included a strategic partnership with Accenture and SAP, for R3’s Corda platform to enable two of the tech industry’s major players to provide a real-time gross settlement token-based exchange, with instantaneous settlements to reduce friction throughout the transaction chain.
Mr Rutter added: “Traditional business models are under threat across the full value chain. We will see the continued convergence of traditional Financial Market Infrastructure and broker businesses such as SIX, NY Stock Exchange, and Nasdaq with the crypto exchange world, such as Coinbase and Binance. We’ll also see new players emerge and the nimblest will win.”
Many of R3’s early adopters were at the event to talk about the work they are doing on Corda—such as TradeIX with Marco Polo, CryptoBLK with project Voltron, The Institutes Risk Alliance, SDX, B3i and ABI Lab to name a few.
Mr Rutter is a financial services veteran, having served as CEO of ICAP’s electronic broking division, before forming R3 and US treasuries platform LiquidityEdge, in the process of being acquired by MarketAxess in a USD 150 million deal
Mr Rutter added: “Corda’s longer term product strategy includes delivering capability on settlement and value transfer because we fundamentally believe we are embarking upon the beginning of a ‘tokenization of everything’ era. Digital Assets or tokens will reimagine how value is moved and managed and will fundamentally change the nature of business.
“Security tokens are squarely now under the purview of the regulators and will fall under global securities regulation. I believe long-term success and sustainability of tokens must rely on compliance with key principles pushed by the maturing regulatory framework. We will need a strong, well balanced ecosystem, regulatory framework, innovative mindset, and know-how from existing market infrastructure, as well as the right enterprise technology.
“We expect to see further enterprise blockchain consolidation. A year or two ago there were dozens maybe more platforms aspiring to be enterprise blockchains and we are already down to two real contenders in Corda and Fabric, with many other still trying to make Ethereum work at scale with proper privacy protections.
“On Interoperability, as applications go into production the need for seamless interoperability becomes more evident, so the surviving platforms need a rock solid interoperability story. I believe what we call “business network operators” the solution providers and of course their customers know that there won’t be just one solution for say Trade Finance so being able to send obligations to other customers on other BNO becomes an absolute necessity.
“The second order of this would be interoperability between blockchains and I think I was first asked about this over four years ago and the story for me is the same. While I think that may be important over a longer time frame it’s not a next year crucial deliverable. And for us anyway we are just looking to further solidify our interoperability story and I am pleased we have been focused on this for some time now.”
Foreign exchange trading platform FXCM Group has launched a basket of five cryptocurrencies aimed at retail investors.
Dubbed CryptoMajor, the basket product includes bitcoin (BTC), XRP, litecoin (LTC), bitcoin cash (BCH) and ethereum (ETH), which are equally weighted to protect against market volatility, the firm said in an announcement Monday. The five cryptos are already traded on its platform.
Speaking on launch, CEO Brendan Callan said the product simplifies crypto investment for retail users:
“Trading a basket of cryptocurrencies means our users are freed from the hassle of constantly monitoring the markets. CryptoMajor therefore streamlines the trading process and protects our customers from unanticipated and adverse market movements.”
The product is targeted at customers seeking to enter the nascent crypto market, Callan said, but who “don’t want to risk too much overexposure.”
Under its previous owner, Global Brokerage, Inc, FXCM notably lost its license with the Commodity Futures Trading Commission, in addition to receiving a $7 million fine, for trading against its own customers in 2017, according to the Financial Times.
After two of the company’s founders were banned from the U.S. financial industry, the London-based company exited the U.S. market. It’s now majority owned by Leucadia Investments, part of the Jefferies Financial Group, according to the FXCM website.
Liquidity Edge, the electronic US Treasuries trading venue, has signed a deal to license Mosaic Smart Data MSX platform to provide venue analytics across its portfolio of marketplaces.
Mosaic Smart Data will give LiquidityEdge a package of analytics that will help the latter to monitor and compare liquidity in the markets to ensure smooth market operation, better trading efficiency and growth facilitation.
These additional analytics will help in comprehending the transaction flow and behaviour of market participants and calculation of market impact, as well as transaction costs. The MSX platform has anomaly detection tools that are built on machine learning tools, that will point to any abnormal market activity that may trigger a rising issue. So, once such an action is detected, preventive measures will be taken to maintain normal market operations.
Market liquidity in fixed income decreases and this creates an obstacle for trading venues to acknowledge possible challenges in their platforms in advance and fix the issues, so solution to fix this problem are constantly sought after.
The deal between LiquidityEdge and Mosaic Smart Data is the result of long collaboration between the two to develop analytic tools for trading operations. The service will be first used by LiquidityEdge on the back-end to get insights on the performance of the trading venue, and afterwards – for insights for market participants.
LiquidityEdge will serve as a SaaS feature with the MSX platform fully managed by Mosaic Smart Data.
This is what the CEO of LiquidityEdge, Mr. Nichola Hunter said:
“We built LiquidityEdge to challenge existing market structures and ‘business as usual’ in the Treasuries market. So, we’re always on the lookout for innovation which will enable us to deliver a better experience to our users. The MSX platform harnesses the power of our order book to deliver finely grained analysis and actionable insights delivering performance improvements for LiquidityEdge and our users.”
Blockchain-based post-trade processing network Cobalt has gone live with Deutsche Bank, XTX Markets and Saxo Bank.
Cobalt is among a clutch of firms bidding to use shared ledger technology to drive down reconcilliation costs and improve operations in the post-trade space. The firm’s platform, set up by by currency trading veterans Andy Coyne and Adrian Patten, delivers a private peer-to-peer network that aims to slash back office costs in FX markets by providing a single, shared view of a transaction to trading counterparties.
By creating a single, standardised view of each transaction, users can manage services such as aggregation and netting via a single platform, thereby reducing duplication and position exposures. From analysis using executed trade data, Cobalt claims to have been able to provide clients over 50% in cost savings across the FX lifecycle.
Russell LaScala, Co-head of Global FX at Deutsche Bank said: “The two biggest business issues banks face today are managing risk and the scaling of their business with the rise of smaller tickets. Cobalt’s solution ensures we can reduce operational risks associated with legacy systems and slash the cost of processing tickets for our entire FX business using a single platform.”
There are currently 20 beta participants waiting to onboard the network, including Citadel Securities and Citi, which became a Cobalt investor in 2016.
JP Morgan and Societe Generale have invested in fintech firm, Wematch, as the company advances its plans to transform traditionally voice-traded financial markets.
Wematch provides technology which augments how traders at banks match, negotiate and manage trades. This brings the audit and control benefits of electronic tools to voice trading, delivered as web-based software-as-a-service technology.
There are now 40 banks and more than 750 traders on Wematch cross assets with more onboarding and billions of dollars in deal flows matched using its technology.
Despite the growth and benefits of e-trading, in some markets institutional investors still conduct most of their trading over the phone, or through interdealer brokers.
Wematch delivers the benefits of the newest web technologies to traders at banks, improving the matching and negotiation process, cutting costs for banks and increasing efficiency and reducing conduct risk for traders.
Wematch came through J.P. Morgan’s In-Residence Programme and Societe Generale’s Global Markets Incubator to foster the expansion of the fintech’s offer across asset classes and instruments.
The funding takes J.P. Morgan’s and Societe Generale’s relationship with Wematch from users to investors, with the banks already active on Wematch across all existing platforms.
There is enormous potential for Wematch to help the capital market industry in further adopting digital solutions across multiple markets globally, and to adapt this awarded technology to internal and client-facing solutions.
Despite pressure from regulators for more trades to be conducted on electronic trading venues, it is estimated that over 80% of structured products and FX derivatives are still transacted by voice.
The interest rate swaps market is worth USD 2.1 trillion a day, according to the Bank for International Settlements, with over 70% of that business handled by phone negotiation.
Gregory Mimoun, co-CEO of Wematch, said: “Wematch is delivering the next generation in trading protocols, with intuitive GUIs and workflow tools to give voice trading professionals the edge. Everything we build is designed to support the trader’s decision, giving them the tools to make the right call with confidence and certainty.”
Joseph Seroussi, co-CEO of Wematch, said: “Wematch is leveraging on the latest available technologies and the traders’ community permanent feedbacks and inputs to develop its capital market solutions. Our objective is to have a significant impact on the bottom line expenses of Financial Institutions by rolling out the Wematch technology on all markets, internal, or dealer-to-client activities.”
Pasquale Cataldi, Head of Markets Lab, J.P. Morgan, said: “J.P. Morgan was an early supporter of WeMatch. As a member of our InResidence Programme, the platform showed real potential to transform the interbank interest rate dealing market through automation, resulting in audit and control benefits. The level of market adoption has already been encouraging and we’re delighted to continue the journey with them.”
Albert Loo, Deputy Head of Sales for Global Markets at Societe Generale, said: “Societe Generale is excited to contribute to the Wematch development after a successful collaboration within our Global Markets Incubator. Innovation in trading technology will drive efficiencies for market participants and we strongly believe that Wematch can sustainably improve dealing processes across asset classes.”
Wematch launched its interest rates offering in June, with 10 banks matching and negotiating Euro IRS curves, butterflies, basis and gadgets structures, with single stock & Index options to follow in the coming months.
This was built on existing Wematch services for securities lending and equity derivatives and the firm now plans to build out services to more asset classes and instruments.
Payments giant Mastercard is to develop a blockchain-powered cross-border payments platform in partnership with enterprise-focused blockchain firm R3.
In an announcement on Wednesday, Mastercard said the two firms have inked a deal to “develop and pilot” the payments solution. It will initially be aimed at connecting faster payments schemes and banks backed by Mastercard’s clearing and settlement network.
The platform will be built on Corda Enterprise, the commercial version of the platform, as opposed to the open-source Corda Network, R3 told CoinDesk.
The partnership is planned to merge R3’s expertise at developing blockchain solutions with Mastercard’s existing payment systems and network. Ultimately, the firms hope the new platform will help tackle industry issues such as costly payments processing, liquidity management and a paucity of standardization and connectivity between banks and domestic clearing systems.
R3 CEO David E. Rutter said:
“All institutions – large or small – rely on the ability to send and receive payments, but all too often the technology they rely upon is cumbersome and expensive. Cross-border payments can be a particular pain point. Corda was designed specifically for enterprise use cases such as this, and we look forward supporting Mastercard in bringing blockchain-enabled payments businesses across the globe.”
Citing its July acquisition of international payments firm Transfast as a boost to its network, Mastercard said the deal to utilize Corda Enterprise will further expand its capabilities in the payments arena.
The news of the partnership also comes just days after Mastercard joined the Marco Polo trade finance blockchain network founded by R3 and TradeIX.
Peter Klein, executive vice president of new payment platforms at Mastercard, said in the announcement:
“Developing a new and better cross-border B2B payments solution by improving worldwide connectivity in the account-to-account space is central to Mastercard’s ambition. Our goal is to deliver global payment infrastructure choice and connectivity as demonstrated through our recent strategic acquisitions and partnerships, including our relationship with R3.”
The FX market currently looks like the ultimate mismatch. Front office processes have been transformed to accommodate the realities of electronic trading – operations and credit haven’t. This is acting as a drag on FX liquidity, as well as imposing an enormous cost burden: ~£20bn per year for the top global investment banks and buy-side institutions. Fortunately, as Anoushka Rayner, Global Head of Sales and Business Development at Cobalt explains, there is a simple and readily achievable remedy: centralised standardisation.
The FX market has a proven track record for acting on its own initiative to ensure that trading is always orderly and unnecessary risks are curtailed, with the creation of CLS an obvious example. There is now a pressing need for it to act in similar fashion to address the issues of post-trade processing and credit management.
The FX front office has evolved to accommodate the shift from a voice brokered market – resulting in transparency, efficiency, liquidity and consistency – by bringing counterparties together so they can interact more effectively. In doing so, all participants have benefited from lower frictional costs and greater transparency.
Sadly, the same cannot be said of FX post-trade processing, which still uses much of the same basic infrastructure it used to support voice broking. In two decades, it has remained essentially unchanged, resulting in legacy processes/practices that are wholly unsuited to supporting electronic trading as conducted in today’s FX front offices. These processes/practices are also excessively costly, to the extent that post-trade costs can now even exceed the potential profit from the execution of a trade.
At the core of the problem are the fragmentation, replication and complexity of internal processes. This is hardly surprising given that at least 23 services are usually involved in managing current FX post-trade activities, which inflates both costs and operational risks. Multiple vendors are needed, as are multiple copies of the same trade (20+ is not untypical). At the same time, existing legacy processing technology cannot keep up with market evolution and so requires additional outlay to pay for the manual processes needed to cover its shortcomings.
In some cases, extremely costly processes persist. These could be dispensed with altogether in a more efficient processing environment. A case in point are confirmations, the costs of which at some top tier FX banks – just for their EB and PB businesses alone – run to nearly USD5mn per year.
Attempts to respond to changes in the front office by changing post-trade methods have also made the situation worse, as new substandard processes are layered on top of an already fragile and inefficient process stack. Each new process added therefore effectively exacerbates an already suboptimal process flow, in terms of both cost and risk.
These issues apply across all FX-related instruments, which when one considers that volume in uncleared FX derivatives (a market approximately twice the size of spot) totaled ~USD88trn at 2018-year end, illustrates the sheer magnitude of the problem. In fact, for FX derivatives, the risks and costs of these operational limitations are even more acute, as the processes involved are more complex than for spot.
These issues are collectively hampering the FX market’s overall efficiency and growth. This applies across bank to client, bank to bank and prime brokerage segments. In some cases, it is already causing market distortion, such as driving participants to review their position in FX prime brokerage. Given the FX market’s established reputation for resolving structural issues of this nature, it should be possible to find a solution internally, rather than directly involving external bodies, such as regulators.
A related area that is also creating unnecessary cost and risk – as well as damping liquidity growth – is credit management. Given the large trading volumes now conducted via API and at high frequency, FX is probably the market least tolerant of latency. Yet despite this, antiquated and fragmented credit management processes still persist, causing significant practical problems. Workaround remedies have emerged in an attempt to address these but create different problems instead. Credit kill switches are a case in point, because they can create disputes when clients find themselves having to reduce positions at unfavourable prices and also requiring a manual unwinding process, exposing both clients and banks to further issues.
Credit-related risks, such as over-commitment, still remain stubbornly high, while workaround remedies actually reduce credit efficiency, such as over-allocating to accommodate localised management of credit within venues. Costs are also an issue in credit management, with top tier banks spending considerable amounts unnecessarily on redundant/inefficient credit processes and technology.
The good news is that a solution is already entirely achievable at technical level. The obvious remedy is a single centralised shared ledger platform using standardised data that can handle all the necessary post-trade activities (plus credit) in one solution. It would mean that compliance with many of the principles in the GFXC’s FX Global Code of Conduct could become an achievable and immediate reality rather than merely being aspirational. A case in point is the principle relating to real time monitoring of trading permissions and credit provision
A centralised industry shared ledger platform would deliver multiple practical benefits across the market place. The most obvious would be to eliminate duplication and cost saving. Instead of running multiple versions of inadequate processes, participants could handle trades using a single set of consistent industry-standard processes. In the long term this could deliver cost savings of up to 80%, with ~50% possible in the medium term.
An additional benefit is cost transparency. In the current environment, with the accumulation of multiple layers of legacy operations and credit technology/processes, it is often extremely difficult to determine the post-trade cost of a transaction. A central standardised process would by contrast make the measurement and monitoring of post-trade costs straightforward and potentially deliver the same degree of transparency as already available for FX execution costs.
This shared ledger approach would also deliver various credit management benefits. For instance, the availability of near real time credit data would enable more efficient credit processes, such as:
Centralising credit management using a shared ledger enables more dynamic control across all types of trading relationship (bilateral, tri party and quadri party). This will dispense with the need for over-allocation and rebalancing in order to accommodate localised management of credit within venues. Those issuing credit will also be taking control of it (as is the case in equity markets) and will therefore be able to recycle it back into the market in the most efficient manner (a key consideration for non-CLS currencies and non-CLS members). Ultimately this will result in venues receiving business because they offer the best price, not because there is residual credit left at them.
In operational terms, workloads will also reduce when using this sort of solution, as less remediation will be required. Efficient credit management and automated processing will drive a reduction in failed trades, thereby also reducing the need for manual intervention and repair.
Liquidity and Regulation
The cost and efficiency benefits delivered by a centralised industry shared ledger platform have important implications for liquidity and market participation. Trading volumes in G7 pairs have been declining in recent years for a variety of reasons, but operational/credit inefficiencies are clearly playing some part if they are cutting trade margins to near zero.
If individual ticket processing costs decline significantly, then logically this will boost existing participants’ willingness to trade, both in general, but also potentially in smaller transaction sizes. By the same token, new participants may be encouraged to join the market once they can see that the processing cost burden and operational risks have been alleviated.
Finally, there are also prospective regulatory advantages to the FX market adopting a centralised shared ledger solution. Some regulators are already clearly aware of the issues, as shown by the FCA and BoE’s convening of a ‘Technology Working Group’ to reform post-trade processing so as to reduce complexity, encourage innovation, and improve systemic resilience. A shared ledger platform could support this initiative in various ways, but one of the most obvious is with regulatory filings.
At present, participants (often using manually intensive processes) incur substantial costs collecting trade data and submitting it to regulators. Market-wide adoption of a shared ledger solution would instead make it possible for participants to submit regulatory filings far more easily, plus do so in a consistent format. This would enable better monitoring of any potential systemic risks, plus delivering lower regulatory costs for all concerned (including regulators). Central banks could send a strong message here by adopting a shared ledger solution for their own trading activities, which would also serve as a clear signal to the organisations they regulate.
Adopting a single centralised utility for FX post-trade functions based on a common data standard ticks numerous boxes for all market participants. These include considerable cost savings, reduced credit/operational risks and better use of balance sheet, which in turn also facilitate greater trading activity and more diverse participation, as well as enhanced price discovery and lower regulatory overheads. Finally, it will also reinforce the FX industry’s existing reputation for innovating in the common interests of all market participants.
Commonwealth Bank of Australia (CBA), ABN Amro, London Forfaiting Company, Crown Agents Bank and Natixis have joined the Trade Finance Distribution Initiative (TFD Initiative).
They join ANZ, Crédit Agricole CIB, Deutsche Bank, HSBC, ING, Lloyds Bank, Rabobank, Standard Bank, Standard Chartered Bank, and Sumitomo Mitsui Banking Corporation as members.
The TFD Initiative is an industry-wide drive to use technology and standardisation for the wider distribution of trade finance assets. Since launching earlier this year, a growing number of banks, institutional investors, trade associations and trade finance service providers have joined as members.
Trade finance presents a compelling multi-trillion dollar investment opportunity for institutional investors seeking sources of long-term, low-risk returns based on the tangible flows of goods and services. However, there is no scalable market infrastructure in existence to facilitate the exchange of trade finance assets between banks and institutional investors.
This has led to the creation of the TFD Initiative. Its members will work together to utilise and adopt a common infrastructure powered by Tradeteq, the global trade finance distribution platform. Tradeteq’s technology allows banks and institutional investors to efficiently connect, interact and transact. It uses machine learning technology for supply chain predictive analysis, transaction level credit scoring, risk management, reporting and portfolio composition.
Anne-Cécile Delas, Global Head of Trade & Treasury Solutions at Natixis, said: “The distribution of our trade finance assets is key to better serving our clients. Networks like the TFD initiative, gathering banking, regulatory and buy-side sectors, will help to make trade finance assets more accessible to a wider range of investors, in a standard and processed way.”
Sylvain Labattu, Executive Director in Global Commodities & Trade team at CBA, said: “We view the TFD Initiative as a crucial process in the opening up of risk distribution in the trade finance asset class. Staying at the forefront of industry-wide technological and process developments enables us to better connect with and serve both our domestic and global corporate client base through excellence in structuring and distribution, access to data and analytics, and best in class corporate digital offering.
Simon Lay, CEO at London Forfaiting Company, said: “We are pleased to become a member of the TFD Initiative and help shape the use of enhanced technology in our industry. The interest in this forum signals that there is growing interest to establish trade finance as a liquid and scalable asset class to a new investor pool. We all stand to gain by increasing collaboration, leveraging new technologies and adopting standardised processes in the trade finance space.”
Robert Pothoven, Associate Director at ABN Amro, said: “We look forward to collaborating with other members of the TFD Initiative and believe bringing the industry together offers a great opportunity to drive forward adoption of more efficient technology throughout the trade finance market.”
Duarte Pedreira, Head of Trade Finance at Crown Agents Bank, said: “The TFD Initiative has the potential to reshape the trade finance market. By opening up the asset class and making it more accessible outside of the traditional banking world, the TFD Initiative is, in essence, creating a fairer playing field, where non-bank investors can also benefit from the excellent risk/reward opportunities presented by trade finance assets. Crown Agents Bank is proud to work alongside our peers to optimise the benefits of trade finance to our clients.”
André Casterman, Board Member at Tradeteq and Chair of the Fintech Committee at the International Trade and Forfaiting Association, adds: “We are pleased to welcome our latest members. The existing trade finance infrastructure that institutions rely on is outdated, and the industry is on the cusp of change. This is a truly international, collaborative effort that includes the banking community, institutional investors, trade associations and other service providers.
“Our members have told us how the benefits of greater trade finance distribution will be felt along the entire trade finance supply chain, from issuers providing letters of credit right through to corporations seeking cross-border funding. By working together, we are one step closer to achieving our objectives.”
Mosaic Smart Data (Mosaic), the real-time capital markets data analytics company, has appointed Oxford University Professor of Mathematical Finance, Rama Cont, as Scientific Advisor.
Professor Cont’s role will be to help Mosaic Smart Data utilise the latest academic quantitative finance research in the development of its machine learning, artificial intelligence and data analytics capabilities. Professor Cont will work directly with Mosaic Smart Data’s data science team to make the latest in data science technology available to Mosaic’s customers, as well as guiding Mosaic’s R&D activities.
In addition, he will contribute to Mosaic’s quant talent recruitment and develop links with the broader research community.
Professor Cont was appointed Professor of Mathematical Finance at St Hugh’s College Oxford in 2018. Previously, he held the Chair of Mathematical Finance at Imperial College London and has 20 years of experience working with the financial markets.
Rama Cont said: “What intrigued me most about working with Mosaic Smart Data was the opportunity to take the theoretical work we are doing on the academic side and demonstrate its practical application in the cut and thrust of the capital markets. Mosaic Smart Data’s customer base, with some of the world’s top financial institutions, provides an unparalleled opportunity to apply this academic research for the best of the best.
“By bringing together Mosaic’s team of highly experienced data scientists with our own world-class researchers, we have an incredible opportunity to bring the most advanced data science ideas to real-world applications. This will strengthen both the Mosaic platform and academic research efforts.”
Matthew Hodgson, CEO and founder of Mosaic Smart Data, said: “The firms that succeed in tomorrow’s markets will be those which can harness their data most effectively, extracting the most useful insights in real-time to drive productivity and performance. Our mission is to provide the tools to make that happen.
“We’ve been working with the scientific community since our beginnings and in 2018, Mosaic became the first fintech to collaborate with the European Space Agency. By working with Rama, we will have direct access to the most promising research being developed at the world’s top institutions to ensure that Mosaic Smart Data’s analytics is always at the leading edge of what’s possible in the capital markets.
Previse scooped up two awards in two cities yesterday as it won the ‘Best use of data and analytics in financial services’ award at the FStech Awards 2019 in London and the ‘Best small employer’ award at the Family Friendly Working Scotland (FFWS) Top Employers Awards 2019 in Glasgow.
Previse was recognised by the FStech judging panel for its unique application of artificial intelligence (AI) technology to get suppliers paid instantly. The fintech overcame tough competition, seeing off banking giants such as HSBC, Morgan Stanley and Credit Suisse.
Previse’s AI technology analyses its clients’ ERP data to predict the few invoices which are unlikely to get paid. The rest can then be paid instantly by a funder, such as a bank. The buyer then pays the funder back on its normal payment terms.
From its inception, Previse has recognised the global scale of the slow payments issue that it aims to solve and so has built its technology to cover the earth. The company’s AI technology can analyse huge amounts of data for each client, each of which has global supply chains, hundreds of suppliers and use multiple currencies. It has huge growth potential and will help unlock $650 billion tied up in slow payments globally.
Previse have already analysed over $150 billion of spend generated from three million suppliers and their algorithms are constantly improving their accuracy as they analyse more data.
Now in their 19th year, the FStech Awards recognise excellence and innovation in the field of information technology within the UK and EMEA financial services sector. Judges included senior personnel from Deutsche Bank, KPMG, EY and Nationwide Building Society.
Upon receiving the FStech award, Previse’s co-founder and CEO, Paul Christensen, commented:
“When Previse’s founders gathered in a tiny room in London, just under three years ago, we recognised that the smart use of data and analytics can eradicate the global problem of slow supplier payments. Our capabilities in these areas are core to the business and we now have offices in London, Glasgow, Edinburgh, Germany, Vietnam and the US, which house some of the world’s leading machine learning PhDs.”
“Winning this award ahead of some huge institutions that have been around for decades is a proud moment for our company. We have signed up eight multinational clients and have partnered with organisations such as PwC, Oracle & RBS-NatWest and are tackling the problem head on.”
“Previse’s mission is to ensure that every supplier in the world can be paid instantly and at the fairest rate. With rapid progress and the enthusiastic participation of some of the world’s largest buyers, we are well on the way to achieving it.”
The FFWS Top Employer Awards, which are now in their fifth year, celebrate forward-thinking employers who understand how flexibility is good for people – helping them successfully balance work and home life – as well as for business growth.
The winners were announced to an audience of 150 Scottish business leaders at a spring-themed Brewery Bash at WEST Brewery in Glasgow yesterday afternoon.
Cobalt, the foreign exchange (FX) infrastructure based on shared ledger and high performance technology, has hired five experienced professionals to lead its drive to re-engineer the FX market.
Post-trade FX is currently riddled with complex legacy systems and manual processes, creating unnecessary cost and risk across the market. The new hires bring a wealth of FX experience to the company and will play an important role in the rollout of Cobalt’s shared infrastructure which optimises risk management and slashes cost by up to 80%.
Bob Linton, based in New York, has become head of connectivity and onboarding at Cobalt. He will be responsible for replacing old, legacy technology incumbent in many institutions’ post-trade FX operations with Cobalt’s low latency, high performance shared ledger technology. He joins following a 13-year stint at market infrastructure technology provider, Traiana.
Dan Evans was appointed product analytics lead and is focused on product innovation and reporting as well as highlighting the hidden opportunities for financial institutions. Dan is experienced in analysing FX trading data both as a director of FX trading at UBS, where he spent seven years, and as the director of his own consultancy.
John Fitzgerald joins as information security manager. John has over 15 years in risk and security management and prior to joining Cobalt, he was the lead for information security at Rathbone Brothers Plc.
Nitin Talway has been appointed head of support. He has over 13 years’ experience in the FX industry having previously worked for institutions including Bank of America Merrill Lynch, RBS/Natwest Markets and Credit Suisse.
Kameldeep Bhachu is now a senior business analyst at Cobalt. He previously worked at Murex and in the FX and treasury divisions at Morgan Stanley, UBS and Royal Bank of Canada. He brings extensive front to back knowledge of the FX cash and derivatives business.
Darren Coote, managing director of Cobalt, commented: “We are thrilled to welcome Bob, Dan, John, Nitin and Kameldeep to the rapidly expanding Cobalt team. They bring a breadth of FX experience across the interdealer and prime broker space and have an intimate knowledge of the competitive landscape as well as financial institutions’ systems. Each will play a key role in reengineering the FX market from the ground up, getting rid of legacy systems and replacing them with new technology which is more suitable for the low-latency FX market of today.”
Electronic US Treasuries (UST) trading venue, LiquidityEdge, has announced it experienced record trading volumes during February 2019.
On February 28, participants traded over USD 31 billion (single count) across both on-the-runs and off-the-runs. It also experienced a record week last month, with USD 101 billion traded between 21-28 February.
The surge in activity was due to the treasury auctions, calendar rolls and the record number of unique participants benefiting from the directed, disclosed model championed by LiquidityEdge. The flexibility in its structure allows clients to choose between one-to-one or many-to-many models, facilitating a combination of anonymous and/or disclosed streaming executable prices creating a bespoke order book for each participant.
This follows on from its record month in January, where it recorded average daily volumes of USD 16 billion, representing a rise of 250% from 2018. A recent Greenwich report referenced LiquidityEdge’s rapid growth and linked it to the rising buy-side interest in aggregating and trading via direct pricing streams
LiquidityEdge is the first US Treasury venue to genuinely challenge the existing market structure that resides between bifurcated D2D and D2C, taking market share from both the traditional interdealer exchanges and RFQ platforms. Since launch, over 100 clients have joined the system, with end users including primary dealers, regional dealers, asset managers, and hedge funds.
The company was founded in 2015 by Wall Street veteran David E. Rutter, who also set up enterprise blockchain firm, R3.
Nichola Hunter, CEO of LiquidityEdge said: “This trading data demonstrates that we are successfully challenging market structure and bringing about change in the largest global fixed income market for the benefit of participants. We expect our market share to continue to grow based on our deep customer pipeline and number of clients currently integrating into the platform.”
Over the past couple of years, insurers have migrated away from their conservative image, leveraging several emerging technologies, including blockchain, to re-think their current business models. One of the most significant technologies leading this digital transformation, blockchain is streamlining back-office processes and systems – and heading into 2019, insurers are accelerating their deployment of the most innovative use cases of enterprise blockchain technology yet.
Insurance companies face a complex web of challenges in today’s market. Regulatory demands are piling up, fraudulent claims are commonplace, and the flow of data is ever increasing. Meanwhile, as digital technology permeates the financial services industry more broadly, customers expect a greater level of innovation than ever before.
Despite the growing demand for tailored products and services, insurers recognized that for transformation to be sustainable, it must begin in the back office. Legacy systems combined with patchwork solutions have perpetuated a closed-off information environment with data silos and resulting operational inefficiencies. Building customer-facing digital solutions on these crumbling foundations would have disastrous consequences.
That is why, over the past two years, insurers have been hard at work behind the scenes deploying cutting-edge enterprise blockchain platforms to overhaul and modernise their back offices. Integrating even just the foundational technology can have a huge impact on a company’s transparency, stability, and efficiency.
By taking the first step of moving its transactions onto a shared ledger, an insurer can potentially eliminate fraudulent and duplicate claims by logging each transaction in a decentralised repository. Instantly, an insurance company is able to verify the authenticity of a customer, policy or claim. This is a simple premise but a huge step forward for the industry.
In addition, with the rise of the Internet of Things (IoT) and connected devices, blockchain provides an efficient and secure way to manage, share and leverage an ever-growing amount of data. Purpose-built enterprise blockchain platforms like Corda overcome the challenges of traditional public blockchains by ensuring sensitive data is only shared with parties that have a need to see it in each instance.
The potential efficiency gains for both the insurer and the insured are dramatic. Consider, for example, a reinsurer, insurer, and broker consolidating their policy data and storing it on a blockchain – the underwriting and application process could be reduced from weeks or even months to near real-time, with no burden on each entity having to gather, reconcile and submit documents.
These core benefits of blockchain technology are now being realised across the global insurance industry, with forward-thinking initiatives such as the RiskBlock Alliance and [ITIC Geneva 2018 contributors] B3i leveraging the power of collaboration to drive adoption and deployment.
By moving to a model in which disparate parties such as insurers, reinsurers and brokers can share and store policy information in a cryptographically secure way, the industry has laid the foundations for the next phase of blockchain-enabled innovation.
Insurers are acutely aware of the need to evolve in order to stay competitive, and streamlining market operations with blockchain technology is freeing up precious capital and resources previously spent on auditing and administrative costs.
Newly created roles such as chief digital officer and chief innovation officer are now commonplace across the industry, with firms vying to increase their market share by developing solutions that meet customers’ demands for innovation while increasing efficiency and profitability. Once data has been migrated to a blockchain platform, the potential to apply other technologies such as artificial intelligence (AI) to utilise this immutable, real-time information is vast.
Dynamic pricing is an example of an emerging blockchain-enabled innovation that benefits both the insurer and the customer, with broad-ranging potential across health insurance, car insurance, property insurance and beyond.
Taking the case of shipping insurance, advances in technologies such as AI and telematics enable insurers to access detailed, real-time information about a ship’s location, age, and condition. This means that if a ship enters pirate waters, its location data can automatically be updated on the blockchain and the insurer can make the necessary adjustments to its risk profile and policy pricing. The same applies to the inverse scenario – for example, if a ship is young, in good condition and doesn’t stray from safe waters. Now consider that the ship is transporting refrigerated cargo, which is also insured. How does an insurer know whether a temperature spike is taking place in a crate at sea a thousand miles from its destination that could potentially destroy the cargo? Thanks to telematics, sensors in the cargo containers can communicate accurate information about temperature, humidity, and atmosphere. This information can be updated in a smart contract on a blockchain platform in real time, enabling an automatic pay-out to the customer if the cargo is spoiled by high or low temperatures. This saves the insurance company time and money while providing the customer with a better experience.
Dynamic pricing also has huge potential in the health insurance space. Health insurers require a vast amount of information about a customer’s medical history and lifestyle in order to piece together a policy, and provision of false or inaccurate information is commonplace. Blockchain enables insurers to accumulate data from multiple verified sources with updates occurring in real time, allowing them to carry out more frequent risk assessments and customise pricing accordingly.
Usage-based insurance (UBI) is another innovation currently reshaping the car insurance industry. Many cars now come equipped with connected features or advanced driver-assisted systems, which are having a profound impact on the way auto insurers handle policies.
Traditionally, car insurance policies have been based on driver characteristics like age, personal information and accident history. With UBI, insurers are able to incorporate driving behaviour data such as speed and hard braking that is updated in real time on the blockchain. In addition, telematics technology in the car can measure the time a driver spends on the road each day, opening up opportunities for pay-as-you-drive insurance policies that incorporate this data into a smart contract.
These developments would be innovative in any sector, but when you consider that the processes underpinning the insurance industry have remained largely unchanged for hundreds of years, the evolution is even more dramatic.
By harnessing the potential of blockchain to tackle back-office challenges head-on, insurers have made the necessary investment to position themselves to take advantage of the myriad of opportunities and further efficiencies that blockchain – and its convergence with other new technologies – will deliver over the coming years.
London has become a hub for Chinese yuan trading and continues to solidify its role at the centre of the global FX markets – even with the spectre of Brexit looming on the horizon – according to the latest data from the Foreign Exchange Joint Standing Committee (FXJSC).
Chaired by the Bank of England, the FXJSC’s semi-annual turnover survey is considered a benchmark for the health of the UK’s wholesale FX market. The numbers for the six-month period leading up to October 2018 were published earlier this week and showed a sharp 17% rise in yuan turnover compared to the April 2018 results.
In particular, USD/CNY turnover increased to a staggering $73 billion per day, its highest absolute turnover to date, and overtook EUR/GBP as the seventh most traded currency pair in London. The UK government has made a concerted effort to promote yuan trading since its internationalisation began and the FXJSC numbers indicate that the hard work is now paying off, according to Pragma Securities, an algorithmic trading technology provider.
This marks a notable moment for what is arguably the most important emerging currency to the global economy. By promoting free use of the yuan, the Chinese monetary authority is enabling Chinese corporates and financial institutions to develop their businesses overseas, which in turn is leading to a continued rise in the currency’s market share.
FX – the largest and most interconnected of global markets – is the crowning jewel of London’s financial services industry and the City is a natural hub for the yuan as it continues its path to internationalisation.
More broadly, the FXJSC survey pegged average daily UK FX turnover at USD 2,611 billion in October 2018, the third largest turnover figure on record for the survey. While this represents a fall of 4% from the record high of $2,727 billion reported in April 2018, it still makes for promising reading in the uncertain macroeconomic and political climate.
In particular, FX spot activity rose to $775 billion, its highest level since April 2015 and a year-on-year increase of 11%. This growth in spot activity was also seen in data released by the Fed in New York, and is reflective of the bouts of volatility which spurred higher trading volumes on electronic platforms such as ParFX.
With the March 29th Brexit deadline fast approaching, the UK could find itself in a very different position when the results of the next FXJSC survey are published, but the signs look overwhelmingly positive for the UK maintaining its tight grip on the global FX market.
It’s that time of year when the great and the *good of global finance converge to hobnob and sell to each other in an exclusive global venue.
No, not Davos. That’s all after-parties, skiing and Leo DiCaprio…we’re talking about Sibos, SWIFT’s annual payments summit.
This year it’s in London. In September. Take away the dead summer months and that’s not far off.
With its frequently brilliant Innotribe sessions and a solid line-up of speakers and panellists, the event has become an unmissable fixture in the financial year for both established and challenger financial firms
Over 7,500 delegates attended Sibos in Sydney last year. Expect that to increase substantially, as London is such a sweet spot as a financial technology hub.
Thousands of financial professionals are going to visit this year.
Chatsworth’s advice? Start planning and booking now. Side venues, hotel rooms, camels, whatever you need. It’s going to be a busy one.
We’ve been covering Sibos for many years, helping our clients make an impact with their investment. We cannot emphasise enough the need to plan from now to maximise your investment.
Don’t commit the funds and then scrabble around two months beforehand. Think about your content. Plan your marketing and PR like a military campaign.
Sibos creates an ocean of announcements, deals and commentary. The media attendance at Sibos is pretty good, but these poor folks get slammed with press releases and announcements.
Make sure you craft your news for optimal market relevance. Got data/analytics? Share it. Contextualise your story. Make your announcements and data market relevant.
So how do you create cut-through when hundreds of other firms are looking to do precisely the same?
Plan your meeting schedule with military precision. And speak to the Sibos team – they are helpful, experienced and will advise you.
Smart social media. Obsess over the conference schedule – map your content to the speaker sessions and your organisation’s view.
Don’t just bang out pointless posts saying something is ‘interesting’ or ‘insightful’ and never reduce yourself to only liking other content. Engage in the debate. If you have a position, share it and build your audience.
And importantly, don’t forget about the people who are not there. More people read about Davos than attend it. The same goes for Sibos; communicate outside of the goldfish bowl.
Overall, get on the case now – don’t wait until August. If your organisation is attending, this will likely be one of your largest marketing and communications investments this year.
Fail to plan, plan to fail. As a US four-star general once said: “There are no secrets to success. It is the result of preparation, hard work, and learning from failure.”
*it’s all relative
The old saying that a picture is worth a thousand words is a vast underestimation. In fact, the human brain processes visual content 60,000 times faster than it does text.
Communication is 93% non-verbal, even in the virtual online space. The brain sees in pictures and that’s how you can easily access your memory.
Images communicate. They make us curious and stimulate our minds as we view them. Visual content works and infographics, in particular, offer a highly effective way in conveying complex information in a simple and concise way.
Infographics are great for breaking down research and multiple data points into a digestible format. As a result, they are one of the most used B2B marketing tools where concepts are often complicated and benefit for a clear visual structure.
They are also excellent at fostering engagement. Infographics are liked and shared on social media x3 times more than other types of content. Speaking of engagement, people following text directions alongside illustrations perform with 300% more accuracy than with no pictures. Clearly, Ikea and Lego are onto something here.
Chatsworth employs our understanding and experience to deliver effective infographics which explain complex structures and ideas with clarity and context. Get in touch and we’ll help bring your narrative to life.
The foreign exchange (FX) industry is now emerging from a difficult period of scandal. Following the resulting increased scrutiny, which culminated in the creation of the FX Global Code, the global USD5 trillion-a-day market finds itself at a crossroads.
The Code’s efficacy is yet to be tested, but adoption continues and is strong. Why does any of this matter? Well for one, foreign exchange remains the world’s largest and most liquid market and plays a critical role in enabling international trade and investment.
Currencies provide a bell-weather for economic health, and short-term sentiment and speculation of course, but also a tool for hedging and the genuine flow of business and goods across borders.
Trust in its operation has to be restored, not just for investors but for the broader reputations of the institutions with FX operations.
A handful of banks, and non-bank trading firms – still mistakenly referred to as “the buy-side” – now dominate FX completely. This concentration was built over two decades and these global franchises have also been the first to adopt new technology and models, from prime brokerage to really maxing out on their API trading strategies.
A common muttering on FX street is that the banks have been distracted by regulation, paving the way for non-banks to steal clients from underneath the noses of the banks. Fair comment or sour grapes?
Meanwhile, in the post-trade space, there is a growing consensus for a shake-up of the current model, which is expensive and outdated. Demands for instant settlement continue to grow and more participants are backing DLT/blockchain-based platforms.
Many of the post-trade giants of today were established more than 20 years ago, as is their technology, so there is certainly scope for disruption. New entrants such as Cobalt are shaking up the post-trade FX landscape, while incumbents sensing their dominant position under threat, are eyeing the roll-out of DLT-based systems and – in some cases – investing in start-up systems.
The move towards automation and straight-through processing began many years ago. Lower costs generally translate into lower barriers to entry, and we have already seen new entrant establish themselves as key market players. This will gather pace and will open the door to a new wave of market players to enter the FX market.
We would most certainly not bet against the blockchain, despite the inevitable kickback to the hype cycle. Cloud computing went through a hype cycle and subsequent trough of disillusionment before becoming a ubiquitous part of the IT landscape on what Gartner calls the slope of enlightenment.
The past is the key to the future of FX. The winners will continue to innovate using technology and will meet the challenges of adopting big data and analytics, distributed ledger technology, cloud computing, robotics and artificial intelligence (AI) head on.
This year, Chatsworth is donating to Crisis to support work helping homeless people in dire need during the winter months.
Crisis is a practical, front-line organisation providing accommodation, food, haircuts, access to doctors and dentists, and advice on benefits, housing and finding jobs.
Please spare a few minutes to listen to and share the podcast with the brilliant Chris O’Dowd and Anne-Marie Duff.
Written by award-winning screenwriter Regina Moriarty and directed by Virginia Gilbert, Baby It’s Cold Outside, is a thought-provoking journey, finding humour in the darkness whilst hitting home the impact of homelessness.
This season is a good time to reflect on all we have and those who may need our help.
Happy Christmas – wishing you and yours the very best for 2019.
When it gets stormy, Chatsworth’s special situations service helps protect and enhance your reputation, ensuring we tell your side of the story and mitigating potentially negative news which could impact your reputation. Our team has decades of experience advising organisations and individuals with intelligence and discretion.
Working with full confidentiality, Chatsworth delivers strategic and tactical PR advice and support when our clients need it most. We give leaders informed advice whether they are facing a potential crisis or in the midst of an existing one, helping them to prepare for and manage the communications challenges which affect their organisation’s reputation, ability to operate or valuation.
Chatsworth has extensive expertise in litigation support – managing the communications process during the course of any legal dispute or adjudicatory processing to protect the client’s reputation. We work closely with in-house and external counsel, leveraging our media relationships to counteract negative publicity, interpret often complex legal issues.
From positive story formulation to rapid rebuttal and response. Chatsworth will move the compass needle your way.
The Risk Awards are the longest-running and most prestigious awards for firms and individuals involved in the global derivatives markets and in risk management. Trad-X was recognised for demonstrating innovation in its technology, products and growth initiatives.
The platform has seen notional trading volumes for EUR and USD products increase by more than 40% year-on-year, and is in the final stages of launching a dealer-to-client central limit order book (CLOB) for EUR-denominated interest rate swaps.
A core component of the Trad-X offering is its reference screens. This ensures the calculation methodology and pricing on the platform is transparent, irrefutable and offers a full audit trail. It was also one of the first to offer the choice of direct execution on the platform via click-and- trade screens, API access or hybrid execution. This enables Tradition’s voice brokers to combine their understanding of market depth and client positioning and submit bids and offers that comply with best execution requirements.
Dan Marcus, CEO of Trad-X, said: “Receiving this prestigious award concludes a milestone year for Trad-X. The launch of MiFID II meant the European derivatives market faced its biggest upheaval since the 2008 financial crisis. We remained strategically clear-sighted on its impact, engaged extensively with regulators to ensure minimal disruption to our clients and accelerated our strategy of hybrid execution. This approach is now yielding results and has led to a significant uptick in trading activity.
“We will continue expand and innovate our business in line with market evolution and client requirements. The launch of our dealer-to-client offering is the first in a line of new products and enhancements we expect to launch over the coming months.”
Mosaic Smart Data (Mosaic), the real-time FICC data analytics company, has launched a new feature for its MSX platform enabling users to instantly generate text reports on their trading activity data using machine learning. The feature will be available to all MSX users and will allow a trading activity report, which would take a member of staff hours to create, to be generated instantly.
Using a machine learning technique called natural language generation (NLG), MSX can generate trading activity reports on any set of analytics on the platform including both voice and electronic trade data. These reports highlight trends and identify anomalies in the transaction data which provide points of interest for traders and sales teams. Using advanced machine learning techniques, the reports can also provide explanations for these anomalies, moving the analytics beyond simple description to providing causative analysis.
The feature offers significant productivity gains for banks’ staff by rapidly generating accurate reports which would otherwise take several hours to compile. The reports can be shared internally to monitor FICC performance or created to provide clients with additional insights on the market and their activities.
The data analysed by the NLG reports is fully customisable by the staff member and can be selected in real-time. This is subject to limits by permissioned controls set by compliance and management, ensuring that data and analytics is only viewable to staff authorized to see it.
Matthew Hodgson, CEO and founder of Mosaic Smart Data, said: “Having advanced analytics at your fingertips is one thing, but for it to really be powerful it needs to be comprehensible to anyone in the bank who needs to use it. This new feature allows users to instantly create the narrative around the data analytics, highlighting the key outliers or trends in the data which they need to pay attention to, enabling rapid understanding of the information.
“Imagine if the bank’s highest performing, most experienced quant could write all the reports it generates. And now imagine those reports could be produced in seconds across the entire global bank 24 hours a day. The gains in efficiency, performance and business insight would have an almost immediate impact on the bottom line.”
ACI – The Financial Markets Association (ACI FMA), has teamed up with the Interarab Cambist Association (ICA) to promote the FX Global Code amongst financial institutions in the Middle East and Africa.
The ICA is a trade association representing professionals working at banks and financial institutions across the Middle East and Africa. Established in 1972, it has members in 15 countries and provides training and workshops relating to asset classes including FX, interest rate products, equities and commodities.
The partnership forms part of the ACI FMA’s goal of strengthening engagement with professionals and institutions in emerging and developing markets. As part of the collaboration, the ACI FMA and the ICA recently combined their annual member conferences – the ACI World Congress and ICA Annual Conference – for the first time in Cairo, Egypt, under the theme “Together Towards Tomorrow”. Over 500 economic experts and financial markets professionals participated in the conference between 25-27 October, making it one of the most high-profile events in the region in 2018.
Rui Correia, Director of Education at ACI FMA, commented: “We are very pleased to build on our cooperation with the Interarab Cambist Association. The Middle East and Africa are amongst the fastest-growing developing markets for FX trading, with countries such as South Africa and United Arab Emirates emerging as key regional trading hubs.
“The launch of the FX Global Code offers a unique opportunity to ensure the all FX market professionals adopt universal standards of ethics, conduct and behaviour. This partnership is an important step in raising awareness of the FX Global Code and promoting adherence.”
The ACI FMA will be hosting a webinar entitled ‘FX Global Code – Education and Adherence’ on the 14 November. It features representatives from the European Central Bank, BBVA, Refinitiv and ING Bank. For more details and to register, please click here.
Cobalt, the foreign exchange (FX) post-trade processing network based on shared infrastructure and high performance technology, has appointed FX specialist Anoushka Rayner as global head of sales and business development.
Anoushka brings over 20 years of experience in the FX industry to Cobalt. She has held a number of high-profile roles, most recently as business manager and global FX sales specialist at Traiana. Prior to this she worked as sales director at smartTrade Technologies and as global head of FX option sales at FXCMPro, the institutional arm of Forex Capital Markets.
Anoushka will be responsible for managing Cobalt’s commercial relationships and will play a key role in scaling up the business as it gets ready for its launch later this year.
Darren Coote, Managing Director of Cobalt, commented: “We are very pleased to welcome Anoushka to our ranks as we work towards reengineering the largest and most liquid financial market in the world. She brings a wealth of experience and contacts to Cobalt and is a key part of our plans as we prepare to launch later this year.”
Anoushka Rayner said: “Current post-trade FX service providers and infrastructure are shackled by legacy technology and inefficient processes which are unfit for purpose. This increases costs for market participants and poses significant operational and systemic risk to the FX market.
“I’m excited to be working for Cobalt as I believe it poses the single biggest innovation to post-trade FX in the last 15 years and look forward to playing my part in creating a shared infrastructure which will benefit the entire market.”
Away from the mania of last year’s ICO gold-rush, the appeal and benefits of raising capital by issuing debt and equity on a blockchain-enabled marketplace has struck a chord in the institutional financial services world. As momentum builds among some of the biggest names in finance, we will soon see properly regulated tokens, fit for real businesses and sovereign entities, writes R3’s Todd McDonald.
2017 saw a huge boom in companies raising money by issuing their own digital currencies, a process that has become known as an initial coin offering, or ICO. Holders of these coins or ‘tokens’ are then able to freely trade them on online crypto exchanges.
ICO activity skyrocketed almost overnight, and by the end of 2017 start-ups had managed to raise a total of more than $5.6 billion. Not bad for a market that barely existed a year earlier.
The potential for quick returns attracted a lot of investors, especially inexperienced retail investors spurred on by stories of crypto-millionaires. As might be expected, the risks associated with these investments were not always fully understood. There have been countless instances of scams, fraud or outright Ponzi schemes, which would be seen as comical except for the fact that it put ‘other people’s money’ clearly at risk.
Unsurprisingly, the amount of money pouring into the sector means regulators are appropriately increasing focus on token issuance projects, particularly in the United States. This, combined with a steep decline in deployable money from cryptocurrency speculation, has led to a clear cooling off period for ICOs.
However, the benefits of a decentralized issuance and transaction marketplace and smart securities contracts have clearly captured the attention of institutional players. 2018 has seen increased focus on security tokens, which offer the promise of spurring a new, lower friction method of asset and capital formation. These ‘enterprise-ready tokens,’ if developed appropriately, could automate or simplify much of the asset origination, issuance, execution, and secondary trading processes that makeup so much of investment banking fees today. Issuers of securities everywhere see the value in a more efficient, effective connection to those looking to allocate capital, all in a safe, regulated and automated environment.
If bitcoin represented the first blockchain revolution and the emergence of enterprise blockchain platforms represented the second, the creation of a new global capital market powered by enterprise security tokens will usher in the third.
The first instances of these new enterprise token will likely focus on what is called asset-backed tokens. Put simply, the digital token represents an asset that is held ‘somewhere else,’ often at a regulated custodian. The token acts as a ‘digital twin’ and can be traded or exchanged freely on a blockchain with settlement finality, while the underlying asset remains blissfully in place at a custodian.
This interplay of a regulated custodian linked with an on-chain digital representation, while seemingly straightforward, unlocks new ways for markets to transact and expand. It offers a way for businesses to begin to iterate and implement enterprise-friendly yet novel digital assets, all from a strong foundation of an accepted regulatory base.
Both emerging and established financial infrastructure players are currently developing solutions to enable the issuance and secondary trading of these asset-backed tokens.
If tokens are to become credible and useful instruments in the institutional world, the quality and type of investor they are able to attract must also be considered. For example, when companies embark on a capital raise, whether it is a Reg D placement or full blown IPO, they (and their investment bank partners) seek ‘strong-hand’ investors – those that aren’t in it just for a quick profit.
The same will apply in the future for companies issuing their debt or equity as tokens, and as such, they will seek out platforms that give them access and distribution to a buy-side of proven investors.
R3 is uniquely positioned to facilitate the emerging ‘token economy’ in a secure and regulated manner. The same enterprise-ready focus that led to the design and capabilities of our Corda platform can be extended to bringing the best innovations of the ‘wild west’ of the token world to the enterprise.
Corda was designed from inception to solve the problem of how to represent real-world agreements on a blockchain in a canonical and enforceable way, and this approach can be directly applied to security token issuance. Financial agreements on Corda take the form of smart contracts, linking business logic and data to associated legal prose in order to ensure that trades executed on the platform are rooted firmly in law.
Other key considerations for security token issuance, such as identity, security, data privacy, and settlement finality, are already handled elegantly by Corda and have been key drivers in securing its position as the blockchain platform of choice in capital markets.
Corda-based token examples actually emerged back in 2016, when we began a collaboration with Bank of Canada, Payments Canada and others under the name Project Jasper, where a token called CAD-COIN represented collateral held by the central bank. Since then, we have seen pilot and production examples from our partners, in particular from HQLAxin securities lending and Tradewind Markets in gold trading.
Connectivity with the established financial services community also differentiates Corda from any other platform in the space. R3 is already in talks with a number of major market infrastructure providers about creating regulated environments for security tokens, underpinned by Corda, and the 200+ member ecosystem includes most of the biggest names in financial services, giving token issuers access to a vast network of high-quality investors. Corporates, banks, asset managers, and market infrastructure providers are also crowding in to provide a stable, regulated settlement asset on Corda. Corda’s unique design supports delivery of digital security tokens against payment in digital cash instruments in a single, atomic transaction. This will reduce time, cost, and perhaps most importantly, risk in the emerging token-enabled credit market on Corda.
Platforms like Corda provide the catalyst and foundation to enable security tokens to become a new and potentially invaluable tool in the capital markets toolbox. Unregulated ICOs provided the inspiration for this next wave, yet the shift is already underway to make tokens enterprise-grade. The third blockchain revolution of digital assets will arguably be the most important and impactful to date.
Once upon a time, I was sitting in Barclays head office on Lombard Street, writing a crystal ball briefing on the growth and threat posed by financial technology for the CEO.
The briefing was printed out and faxed to him because I didn’t have an email account from which to send it. They hadn’t sorted them out for the lower tiers yet. Oh, the sweet irony.
Fast forward a *few* years and fintech is now white hot and getting hotter. The sector has sky-rocketed this year, with worldwide global investment in the sector for the first half of 2018 exceeding the whole sum value of 2017.
Where the Silicon Roundabout has failed to deliver on its hype and deliver us with a home-grown tech giant, the city has busily output dozens of outstanding, world-class, fintech firms.
Not wishing to crow, but London has received more investment in its fintech sector than any other country in the world, with over $16.1 billion of inbound investment during the first half of the year. That puts it firmly ahead of China ($15.1 billion) and the US ($14.2 billion). That is a success story, right there.
But the UK’s position as the leading fintech hub is by no means guaranteed. The history of financial markets teach us that liquidity is hard to shift – but when it moves, it moves fast.
Australia’s magnificent capital – with a AU$60 billion ($43.3 billion) financial services industry. Think tank, Australian Fintech, estimates the sector has the potential to take up to 30% of revenue from traditional banking in Australia over the next few years, a prize worth a cool AU$25 billion (18 billion).
And so the banks, acutely aware that their lunch is under threat, are converging in Sydney for Sibos, the annual conference, networking event and shopfront for Swift’s services.
With its frequently brilliant Innotribe sessions and a solid line-up of speakers and panelists, the event has become a curious arena. It is hosted by an older, more established technology and payments infrastructure, but offers a safe space for challenger start-ups to engage, network and meet potential bank customers.
With start-ups to the left and shareholders to the right, banks may feel like they are in the squeezed middle. But in truth, finance and technology have become inseparable over the past decade or two. Crucially, the banks still hold the cards, the liquidity and the capital.
Fintechs need the banks. They have the markets, connectivity and ultimately the influence over any change to existing systems. And the banks, for their part, have been excellent investors and partners. They continue to engage and partner with fintechs – investing, encouraging, collaborating and beta testing. It was always going to be this way.
The bulldozer approach of some self-titled “disruptive” start-ups, where you build an alternative system and then trying to slam it into an existing market, simply does not work.
Chatsworth knows a fair bit about fintech. We were the first marketing and communications agency to focus on this sector, working on electronic broking, online banking and market data with systems like EBS, CLS, ICAP and Barclays.
Over time, the story and clients moved onto prime brokerage and API trading, through to today’s blockchain-inspired technology, smart analytics and machine learning. The markets and technology have evolved, but the methods and indicators of success remain the same.
We have launched and supported both larger infrastructure providers as well as some brilliant start-ups such as Previse, which tackles late payments for businesses, and Mosaic Smart Data, which applies smart data and analytics to wholesale financial markets.
Then there is R3, the breakout story in the enterprise blockchain space and the fulcrum for those looking to apply this technology to professional markets. Their model of engaging and working with banks, financial institutions and regulators right from the start has paid dividends, with over 200 organisations contributing to the development of the Corda platform.
This is ground-breaking innovation – delivered by super smart people who know markets and understand technology. They are working with banks and their customers to tackle real-world problems.
So, what is the shared DNA of successful fintechs? Firstly, the combination of financial markets experience and technical and engineering excellence within their teams.
Second, an absolute focus on engagement with the existing market infrastructures to work and define the use cases before development.
And last, a seemingly inexhaustible supply of energy, drive, curiosity, and intelligence.
Of course, everyone says they are specialists in fintech, and blockchain in particular, nowadays – witness the sheer volume of self-appointed advisors and PR “specialists” on LinkedIn.
In truth, this gold rush of the inexperienced is partly to blame for an over-cooked news and hype cycle which inevitably sets unrealistic expectations for speed of adoption.
So choose your advisors wisely and trust your reputation to the best hands. They will articulate and tell your story with confidence, creativity, and commitment.
Wishing everyone a fantastic and productive Sibos 2018.
Play is about being inquisitive. It is about trial and error. It is how we learn and improve. A world without play is a world without growth.
That is the insight at the heart of the FCA’s sandbox, and it is a fundamental reason the UK is at the heart of global fintech.
Other regulators have not taken such an enlightened approach. Last week French and German regulators threw their toys out of the pram claiming that FCA’s sandbox is anticompetitive.
They claimed that the FCA’s approach – which allows certain companies to test their technologies with real customers before getting full regulatory approval and within an environment which is more forgiving from a regulation perspective – is unfair to large established players.
This is not the first time foreign regulators have criticised the sandbox approach. In August, NYFDS’s Maria T. Vullo, rejected the idea of the NYFDS setting one up saying that only ‘toddlers play in sandboxes. Adults play by the rules.’
It is true that companies which are admitted to the sandbox get an advantage. They are not subject to the same strictures as a large bank would be when developing a new service. That does allow them to be more agile and test their services in real-world environments – an invaluable opportunity for developers of emerging technology.
That said, there is a strong argument to make that, far from being anti-competitive, the sandbox is actually helping to level the field between fintechs and the banks.
Regulatory approval is a long, protracted and extremely costly process. There are no guarantees. There is always the risk that the regulator won’t give the final go ahead, leaving a firm with significant legal costs, wasted time and nothing much to show for it.
Banks are in constant communication with the regulators. They can also hire armies of specialists to give themselves the best chance of getting their services approved. Many fintechs have neither of these advantages. The sandbox gives them a chance to work with the regulator in a more collaborative environment to find solutions to any regulatory challenges within the technology design and allow the fintech to change course if their current design causes the regulator too much concern.
In doing this, the sandbox helps reduce the costs of regulation for the companies which can least afford it, boosting – not stifling – competition.
Not only is the sandbox good for fintechs, but it is also good for the regulator, consumers and even the large banks themselves.
For the regulators, it is a chance to develop a deeper understanding of the latest technologies, such as blockchain and machine learning, by collaborating with their creators. This can help lead to more sophisticated regulation and help the FCA ensure it is keeping pace with technological change.
One of the core stipulations of the sandbox is the protection of consumers. This is something the FCA has emphasised time and again when talking about the sandbox. By taking this approach, it is allowing consumers to access new services years before they would otherwise be available while ensuring they still enjoy a high level of protection from the FCA.
Finally, a little healthy competition is good for banks. Change is not easy and, without dynamic, agile and hungry competition snapping at their heals, there is little real incentive for banks or infrastructure providers to make the much-needed upgrades to their systems and services.
There are many fintech ’specialists’ out there talking about how banks are going to be ‘disrupted’ out of existence by fintech ‘challengers’. The reality of the market is that most successful fintechs are forming partnerships with banks to the benefit of both parties.
Fintechs need the banks, which hold sticky client relationships and huge institutional expertise, while the banks benefit hugely from the innovation and efficiencies which fintechs can bring.
Sandboxes are an excellent way to nurture the next generation of partners, vendors and acquisition targets for banks – not their nemesis.
The UK remains the best place to start and grow a fintech. The FCA’s sandbox is a meaningful part of the reason why, long may it continue.
As the summer lull comes to a close, it has become apparent that there was no ‘sleepy summer’ for spot FX traders this year. Data from ECNs that publicly report their volumes has revealed that trading activity was largely up across the board in August.
NEX reported a 3% increase in spot FX trading activity as its volumes increased from $81.9 billion in July to $83 billion in August. Year-on-year volumes saw a slight increase of 2%.
Thomson Reuters’ spot FX volumes remained flat at $94 billion, but August’s trading activity represents a 14.7% increase when compared to the same period in 2017.
Cboe FX’s spot volumes rose by 3.9% from July to $34.5 billion. Year-on-year growth was an impressive 27.3%. The venue has now had 12 months during which ADV has been in excess of $30 billion per day.
Spot FX volumes on Fastmatch fell by around 2.5% from $20 billion in July to $19.5 billion in August. This follows a 9% decrease the previous month. However, year-on-year comparisons show an increase of 20%. Although it didn’t see an increase in ADV, its FX Tape saw a record amount of activity, averaging $83.6 billion a day in August.
FXSpotStream reported an ADV of $28.4 billion, up 2.5% from July and up a whopping 47.6% from August 2017.
CLS reported a 2.2% increase in August’s ADV to $425 billion. However, this is down 1.9% for the same period last year.
*All figures in US$
After a very slow start to the summer trading season in July, data shows that most platforms experienced a slight recovery in spot FX volumes in August.
Despite the seasonal decline, trading activity in the market was stable, aided by volatility in emerging markets.
Once again, political events have played a major role in volatility. After the Turkish central bank lost its independence, the lira went into freefall.
The Argentinean peso was another currency in the crosshairs of currency traders. At the tail end of August, the central bank ratcheted up interest rates to a whopping 60%. Despite this drastic action, the currency continued to plunge 12%.
The Russian ruble experienced its worst month since April against the dollar, on the back of US announcements to introduce new sanctions against Russia
The decline in these currencies helped trigger a broader sell-off in the developing world’s markets, with JPMorgan’s emerging market currency gauge sliding 1% at one point to a new record low.
Industry insiders think that what happened in August is a sign of things to come over the next few months.
Political factors are continually weighing on currency movements. With prospective rate hikes from the US Federal Reserve coming into play before the end of the year and Trump’s Twitter account continuing to wreak havoc, many expect volatility to continue.
Some predict that the lack of stability and transparency in Turkey will drive more business away from the lira to ‘safe-haven’ currencies.
Closer to home, Brexit negotiations remain the topic of focus. There seems to be no end to near-term uncertainty; in fact, a Reuters poll predicts a no-deal Brexit could see GBP fall as much as 8%!
Cobalt, the foreign exchange (FX) post-trade processing network based on shared infrastructure and high-performance technology, has appointed FX industry veteran Darren Coote as managing director.
Darren has been working with Cobalt since the end of 2017 as a strategic advisor and will now take on responsibility for the day to day management of the company. This comes at a key time for Cobalt as the company launches and looks to significantly scale its business.
Darren brings over 25 years’ experience in FX to Cobalt, having held a number of high profile roles running global FX trading and e-FX businesses at UBS where he drove the business through significant industry and technology change. He has also worked for Lloyds, served on a number of FX boards and committees including the Bank of England’s FX Joint Standing Committee and EBS’s executive board prior to the company’s sale to ICAP in 2006.
Adrian Patten, Co-Founder, and Chairman of Cobalt, commented: “We are very pleased to welcome Darren to our fast-growing team. He brings invaluable expertise and market contacts. We are confident he is the right person to lead Cobalt as we prepare to go into full production later this year.”
Darren Coote said: “Having worked in FX for over 25 years, I have seen first-hand the negative impact that aging, inefficient legacy technology is having on market participants and their bottom line. As the industry gets increasingly competitive and margins shrink, it’s important for institutions to save money and mitigate risk wherever possible.
“Cobalt is a unique solution which solves an urgent need for participants by creating a shared FX post-trade back office utility, significantly reducing risk and cost by 80%. I’m excited to play a key role in Cobalt’s development as we prepare to go live this year and re-engineer the FX market from the ground up.”
This May, Cobalt secured a strategic investment from Singapore Exchange (SGX), which operates Asia’s largest, most diverse and fastest growing FX exchange.