FX Operations and Credit: Hampering Liquidity, Raising Costs (White Paper)

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.

Operational Drag

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.

Credit

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 Remedy

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:

  • Preventing erroneous credit cut-offs (thus improving client relations)
  • Making more efficient use of available lines
  • Avoiding over-commitment risks
  • Alleviating balance sheet pressure

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.

Conclusion

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.

Five more banks and financial institutions join the Trade Finance Distribution Initiative

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.”

Renowned Professor, Rama Cont, joins Mosaic Smart Data as Scientific Advisor

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.

London maintains its grip on global FX market

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.

Sibos London – plan ahead with military precision to get the best results

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

Using effective infographics to frame your business narrative

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. 

Briefing: FX, the world’s largest and most liquid financial market

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.

Baby, It’s Cold Outside – Chatsworth Christmas Charity Appeal

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.

Crisis public relations and issues management

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.

Andy Bria joins LiquidityEdge as Chief Operating Officer

Electronic US Treasuries (UST) trading venue LiquidityEdge today announced that Andy Bria has joined as Chief Operating Officer, based in New York.

Since launching in September 2015, LiquidityEdge has rapidly grown its UST market share and volumes, establishing itself as an alternative model for fixed income. Following the success of the platform, LiquidityEdge has selected Andy to drive further growth and lead LiquidityEdge’s expansion plans.

Andy joins LiquidityEdge from NEX Group, where he held multiple senior roles across client services for both the flagship EBS and BrokerTec brands for over 13 years. Andy was Head of Client Services for six years and in 2011, successfully managed all client-facing aspects of the BrokerTec technology platform refresh.

Andy’s extensive experience in electronic trading and client relations, combined with his expertise in capital markets, ideally places him to help lead LiquidityEdge’s strategy and operations.

Nichola Hunter, CEO of LiquidityEdge, comments: “We’re delighted to welcome Andy to the team and believe his experience in electronic trading will be invaluable to LiquidityEdge in the years ahead. Andy’s strategic guidance will be greatly beneficial as we move into the next phase of growth and we look forward to working with him.”

UK Holds the Crown for Worldwide Fintech Investment

The UK has received more investment in its fintech sector than any other country in the world, according to KPMG’s latest Venture Pulse Report.

With over US$16.1bn of inbound investment during the first half of the year, the UK is firmly ahead of China (US$15.1bn) and the United States (US$14.2bn).

Europe currently stands as the leading continent for fintech investment ($26bn), with the UK accounting for over half of this. Moreover, four of the ten largest European fintech deals were conducted in the UK. This includes the US$250m raised by Revolut in April and US$100m by eToro in March of this year.

KPMG also predicts that the UK will retain its crown in the second half of 2018.

The report cites artificial intelligence (AI) as one of the main sectors responsible for attracting fintech investment in the UK. Hot startups such as Previse and Mosaic Smart Data are utilising the technology to revolutionise areas as diverse as late payments and data analytics in wholesale financial markets.

Brexit

With the shadow of Brexit looming large, it is a timely reminder of the importance of the UK to the global fintech community. In a keynote speech at London Fintech Week earlier this month, our CEO Nick Murray-Leslie noted how finance and technology are almost indivisible; nowhere comes close to London in terms of dominance as a financial centre and, by extension, a fintech hub.

The strong data also dismisses the notion that Brexit is affecting the way investors think about the City and the rest of the UK. Our view is that Brexit is not the biggest risk to London; rather, it is the risk that the UK, and London in particular, becomes a victim of its own success and unaffordable or unattractive for people.

This city has been undergoing its own version of what scholars of US cities have termed “the Great Inversion”. This is the return of people, high-end housing and highly-paid jobs to city centres. If it becomes too expensive these people will go elsewhere and there may soon be only two types of people left: the wealthy and those who are in social housing. This will be a problem.

Looking Forward

Beyond the UK, fintech as an industry has sky-rocketed this year. Worldwide global fintech investment this year has already exceeded the whole sum value of 2017, proving why it’s crucial for the UK to remain at the forefront of this vital sector.

Chatsworth has been working with a number of award-winning start-ups and established fintechs such as Previse (late payments), Mosaic Smart Data (data analytics), R3 (blockchain), and can personally avow for how London can support a fintech business of any size, better than any other city in the world.

Looking forward to the third-quarter of the year, tax reforms in the US, a significant amount of dry powder and the continued flow of funding into the VC world are expected to keep the fintech investment market strong over the next quarter.

AI and data analytics are expected to remain high on the radar of VC investors. It is also expected that companies in maturing sectors, such as e-commerce, will continue to broaden their offerings and investments in order to access new or adjacent verticals.

But as KPMG notes, an area that may be one to watch over the next quarter will be valuations – particularly for companies with no tangible assets, where investors are focused on what the company might do in the future. The level of assumption and risk involved in these types of valuations is quite high and it is still to be seen if these valuations will be substantiated.

London’s Fintech Scene Greatest Threat Is Not Brexit

Finance and technology are almost indivisible. Nowhere comes close to London in terms of dominance as a financial centre and, by extension, a fintech hub.

Activity in the sector has really exploded in the last half decade. Inward investment to London has doubled since 2014 and it was the leading sector for investment in 2017. UK fintech attracted a record £1.34 billion VC funding, double the amount of any other European country.

That is why some of the most exciting fintech companies in the world, like R3, a consortium of over 200 banks and funds building a blockchain for finance and business, are building right here, in London.

Why London?

This city has been the beating heart of international finance for centuries. The Bank of England was the second central bank in the world and provided the financial flexibility which would be the foundation of the Empire’s power and which has pertained to this day.

Towards the turn of the millennium, the “Big Bang” reforms of the 1980s complimented the infrastructure and expertise which had evolved from running the Empire and led to London becoming the model for global financial administration. Only in a city with London’s concentration of intellectual capital would this have been possible.

So while our cousins across the pond had to deal with the bureaucracy and the restrictive regulation of the Sarbanes-Oxley Act, we didn’t. Companies simply decided to avoid the hassle by conducting their business in the US and listed their stocks in London where the people and skills were ready for them.

London also holds a unique position in terms of our legal environment, M&A expertise and even our timezone which, even today, remain important factors.

Financial professionals are redefining fintech

Fast forward and these advantage carry over into the fintech sector. There are now legions of financial market professionals and traders moving into fintechs, working with the designers and coders.

Many of my clients are former desk heads or former heads of market data – they have had successful careers but had spotted opportunities to apply technology to improve what they do. These people are bringing their knowledge of the markets, instruments and the complexities of international regulation to the table.

Brexit

Just because London is the undisputed home of fintech today, doesn’t mean that is always going to be the case. I see a couple of threats on the near horizon that need dealing with to stay on top.

Brexit is an obvious concern. We simply must make sure that we remain open for business and be seen to be open for business. I do not agree with the former Foreign Secretary’s reported view that business should go “reproduce” with itself.

If the final deal jeopardises the status of London in the global markets there’s more at risk than just transactions going elsewhere. This is about a concentration of talent and access to capital. The way the UK makes relationships with other countries and structures its own agenda in the run up to Brexit will be key to its success.

London’s talent pool

So Brexit is clearly a risk, but I don’t actually think it’s the biggest risk to London. I think the biggest risk is that it becomes a victim of its own success and unaffordable or unattractive for people.

This city has been undergoing its own version of what scholars of US cities have termed “the Great Inversion”. This is the return of people, high-end housing and highly-paid jobs to city centres.

Inner London’s growth was in part fostered by the ability of creative people from various fields to cluster together and share ideas.

If inner London becomes too expensive these people will go elsewhere. In inner London there may soon be only two types of people left: the wealthy and those who are in social housing. This will be a problem.

London needs to be good for both business and for people and their families. That means ensuring individual and corporation tax is sensible and that families can afford to live in a capital with effective services.

Word to the risk takers

Some final words of tribute to the fintech risk takers who have put their time, their own and their investor’s money, plus a whole lot of coffee and sleepless nights into their concept, design and build.

If you’re doing it in the wholesale markets space, you’re competing for attention in the face of an established tech infrastructure, highly resistant to change. It’s tough, but ultimately the USP of your platform or offering will do the talking. Never give up. Get it right and you will change a – part of this business world for the better.

London FX turnover hits record high

The results of a new survey released by the Bank of England have revealed record-breaking FX turnover in the UK during April this year.

The survey, compiled with the responses of 28 London-based institutions, shows that daily FX turnover during the month was a staggering $2,727bn – up 15% on October last year and 14% on April last year.

The Bank of England says this represents the highest reported turnover on record, beating the previous peak of $2,711bn set in October 2014.

Turnover in FX swaps accounted for the largest increase, growing by 18% compared with October last year. There was an 18% increase in turnover in the sterling-dollar currency pair, an 11% increase in euro-dollar trading and a 13% increase in dollar-yen. 

In particular, London’s turnover in the British pound rose to a record $351 billion, up 18% from October 2017 and nearly doubling from last year. This was driven largely by traders dumping the pound against the dollar when the Bank of England declined to raise interest rates.

The survey results reflect London’s continued position as the epicentre of the global currency markets, despite ongoing debate about the UK’s future trade arrangements post-Brexit. The UK growth rate in turnover also overtook US data revealed today by the Federal Reserve Bank of New York, which showed a 5.2% increase on a six-month basis and 11.7% year-on-year, with turnover only around one-third of that in London.

As ever, volatility has been the major driver for the increase in turnover. After years of ultra-low interest rates across the globe, central banks are beginning to diverge again in terms of where they set their policy rates. Growing concerns over a global trade war and political turmoil in the Eurozone have also contributed significantly to this volatility.

FX trading remains one of the City’s most profitable industries, and the Bank of England’s survey is a timely reminder of the dominance of the UK’s FX providers in a period of significant political and economic uncertainty for the country.

Chatsworth delivers opening keynote at London FinTech Week

To Westminster, where Chatsworth’s CEO Nick Murray-Leslie was the opening keynote speaker at this years’ London FinTech Week.

 The event brought together the best and brightest FinTech firms, individuals, developers, and entrepreneurs.

 FinTech is a truly global sector, with focussed hubs developing in both developed and emerging markets.

Nick’s speech focused on London as a FinTech hub, how London had gained traction as a global fintech hub and what it must do to retain that critical position, from attracting investment and venture capital, the talent pool, expansion opportunities and the impact of Brexit.

He also introduced Richard Brown, CTO of R3 for a deep dive into how a major banking technology consortium chose London for its technical and operational HQ and how the city’s talent pool and unique position in the intersection of finance, timezones and continents contributed to its success.

Deepwell enters new phase with 7 major hires across three continents

DeepWell Liquidity Management, the global financial markets intermediary for the buy-side community, has added seven senior market professionals to its team across three continents as it eyes further growth and expansion into different asset classes.

DeepWell launched in September 2017 and offers global coverage across a range of OTC and exchange-traded FX products, including spot, forwards, options and futures.

The company’s new hires experience range from the who’s who of the banking world, from, Credit Suisse, Morgan Stanley, Deutsche Bank to RBS, with more than century’s worth of experience between them.

In an interview with Finance Magnates, Deepwell CEO Richard Leighton spoke on the purpose of the hirings, “These additions will allow us to continue meeting the demand we are experiencing for our services and will help us to grow our market share in FX. Growing our capacity also enables us to service more institutions and investors and look at expanding other markets and products.”

These hiring’s have evidently taken place with a larger goal in mind. In the same interview, Leighton went to explain, “We took the strategic decision to set up offices in three of the biggest FX hubs in the world as we believe these have the greatest growth potential. We expect to grow our team at each of these locations as we continue to increase our market share in FX and expand into new asset classes.”

Mosaic Smart Data & Previse named in Europe’s 50 Hottest Fintechs

Last week, Fintech City unveiled the sixth annual list of Europe’s top fintech50 companies. The list is selected by a panel of internationally renowned figures across finance and technology from a long-list of 1,800 companies. We were very proud to see Mosaic Smart Data and Previse added to the list this year for the first time.

Drawn from both B2C fintechs and those aimed at the institutional market, the list includes a wide range of business models and technologies.

Mosaic Smart Data and Previse lead a strong contingent of data analytics and machine learning companies. Both companies have had huge success targeting these technologies at specific, previously unsolvable, business problems.

In the case of Mosaic, it is enabling institutions to, for the first time, see their fixed income, currencies and commodities business in real-time. It uses advanced analytics to enable sales teams to generate useable insights to boost their performance and improve client servicing. In the last twelve months, Mosaic announced its first client, secured funding and expanded its team.

Previse is using machine learning to enable large businesses to have their suppliers paid instantly. It has made it onto the list in just its second year of business after securing funding from the Scottish Government and welcoming senior business figures such as John Gildersleeve and David Tyler to its advisory board.

As well as analytics companies like Mosaic Smart Data and Previse, a big trend in the 2018 list are blockchain companies. The list includes businesses applying the technology to a range of fields, from wholesale payments settlement to digital identity and cybersecurity.

Data analytics and blockchain are moving beyond theory and are now actively transforming global finance. It is, therefore, no surprise that these technologies feature strongly in this list of the most exciting financial technology companies.

We are proud to be working with some of the companies in the vanguard of these changes, both in Europe and the United States.

Creative Clerkenwell shows its true colours during CDW 2018

Clerkenwell Design Week 2018 kicked off this week, showcasing the area’s creativity and innovation with a programme full of thought-provoking exhibitions and must-see installations.

Thousands of people from around the country have descended on Clerkenwell to attend or take part in the world-class A&D festival.

Chatsworth Communications is pleased to support the 9th edition of the Clerkenwell Design Week 2018. We look forward to this event every year and in 2018, we provided data which was used for one of the installations.

Being based in Clerkenwell Close has meant we have seen the heart of the action. One of our favourite parts was in the picturesque grounds of St James Church which featured ‘Design Fields’, a showcase of leading furniture, lighting and product design from around the world.

There was also a lot of interest in Platform, a show that recognizes some of the world’s most exciting up-and-coming design talent.

New for 2018 was ‘Light’, an installation which took over Fabric nightclub. The former cold-store turned nightclub hosted within its brick vaults an exhibition dedicated to top international lighting brands with spectacular stand alone lighting installations.

The last events take place tonight, so drop into Clerkenwell to avoid missing out on the colourful creativity on display before the remarkable fixings are put away for another year.

UK Remains at the Forefront of the Fintech Revolution

Despite fierce competition, the UK remains at the forefront of the fintech revolution according to the ‘Finance for Fintech’ report, launched recently by London Stock Exchange Group and TheCityUK.

The independent survey, carried out by YouGov, interviewed over 400 fintech companies across eight countries, all of which have had at least Series A funding rounds or above, and provided interesting insights into the global fintech scene.

Bullish UK fintech scene

UK fintechs are bullish about their growth prospects.

The research highlighted that fintech companies operating in the UK expect to grow by 88 per cent over the next three years, 8% higher than the overall average.

Vital to this growth is raising finance and this process is reportedly more straightforward for UK fintechs in public markets than those operating in other countries, making it an attractive location for fast-growth companies. Chancellor Philip Hammond recently supported this view, pointing out that investment in UK fintech more than doubled last year, outpacing the funding of EU rivals such as Germany.

Interestingly, fintechs surveyed placed the UK as the third best  location for businesses seeking to grow their international footprint, only behind the US and China.

Fintech Revolution in Europe?

That said, competition is heating up.

Europe increasingly seeks to strengthen its position as a regional fintech hub. On 8 March, the European Commission announced an action plan on how it will do just that; new rules that will help crowdfunding platforms to grow across the EU’s single market.

The impact of this will be interesting as one of the primary barriers to fintech growth is competition according to 43% of those surveyed.

Regulation

Fintechs require a supportive global regulatory environment to flourish.

You have to applaud the FCA’s exploration of a potential global regulatory sandbox following the success of its UK version. The UK version, launched in 2016, helped fintechs to test innovations with real customers in the live market but under controlled conditions.

The global sandbox could allow firms to conduct tests from London into different jurisdictions at the same time, enabling regulators to collaborate to solve cross-border problems.

This has the potential to strengthen London’s position as a destination for global fintech companies as they can come from all around the world to test their products and find out how they can expand internationally.

Fintech is by definition without borders.

The research shows that fintechs across the world are becoming increasingly cross-border in their growth aspirations with 72% of the 400 companies surveyed planning to expand into new countries. 73% believe they will need to move into new or develop existing market sectors in order to achieve this growth and almost three-quarters believe long-term growth will be driven, at least in part, by new technologies.

It is worth noting that those who have reached Series D rounds or above have the biggest appetite for expansions and anticipate achieving a monumental growth of 320%.

While fintechs seek global expansion, it is important they don’t lose sight of the importance of being located close to the core financial hubs as crossover will, by and large, determine their success.

It is clear that in order for fintechs to thrive and continue to transform the global financial services sector, they need access to finance, a supportive global regulatory environment and proximity to the global financial services sector. The UK currently offers all three.

The report demonstrates that while the UK remains at the forefront of the fintech revolution, it must continue to innovate and work collaboratively in order to maintain its leading position, especially with Europe hot on its heels.

 

For daily updates from Chatsworth Communications follow us on Twitter.

Banks Are Prioritising Digital Transformation

Fintech has barely even got started if a new report from EY is to be believed. Less than 20% of banks believe they are doing enough as a business to invest in technology, according to EY’s Global Banking Outlook study. This, despite some substantial leaps forward in technological capability and significant investment.

To combat this, more than half of banks surveyed in the report expect budgets for technological investment to rise by 10% this year, and more than half of banks aspire to be digitally maturing or digital leaders by 2020. Banks appetite to invest and partner with fintech firms may in part explain why last year was a bumper year for fintech VC funding, with $1.8 billion raised by UK firms.

This new investment opens up major new growth opportunities for the already thriving financial technology market.

The impact of fintech is being felt in every part of finance, from retail banking to back-office compliance. But one of the key focuses for banks over the past few years has been using technology to try to deal with stringent compliance and regulation, which slows down, complicates and adds expense to transactions.

Solving this is one of the key promises of distributed ledger technology (DLT) which is being touted as a new way to create trust between institutions, lower compliance costs and create information sharing efficiencies. This year, we are likely to see the first examples of DLT moving from proof of concept into market operation.

Data analytics and machine learning are likely to be another hotspot of activity this year. Many banks have begun announcing project designs in all kinds of areas of the bank, from back-office automation to the use of machine learning to improve execution quality.

For example, JP Morgan is working with UK based data analytics company Mosaic Smart Data to unlock insights from its internal FICC data to improve client handling and FICC performance.

In trade finance, Previse is looking to end late payments for SME suppliers with its advanced machine learning and innovative finance model which creates opportunities for buyers, sellers and banks alike.

The last few years have seen an explosion in financial technology. However, emerging technologies begin to mature, and banks continue to strive to be more efficient and effective, it looks like the fintech surge is only just beginning.

 

SWIFT GPI Reduces Cross Border Transactions To Minutes & Seconds

The cross-border payments industry has seen a revolution in speed and transparency over the past decade or so. A generation of new companies are eyeing the role of incumbents and exploring new technologies such as blockchain to transform existing processes.

However, examples of genuine innovation are beginning to emerge amongst both new providers and incumbents. Once such example is the global banking messaging giant SWIFT, which revealed that users of its Global Payments Initiative (GPI) service, are receiving payments within minutes, and even seconds.

SWIFT GPI

Nearly 50% of SWIFT gpi payments are credited to end beneficiaries within 30 minutes, and almost 100% of payments within 24 hours. With all payments fully traceable, there have been fewer enquiry-related queries, reducing costs for banks by as much as 50%.

SWIFT has set the international standard for cross-border payments for over four decades, and this week’s announcement directly addresses the perception that its payments are slow and cannot keep up with the new upstarts.

To the contrary, SWIFT gpi continues to gain significant traction; traffic already accounts for nearly 10% of total SWIFT cross-border payments, and over USD 100 billion is being transacted every day by 150 banks across more than 220 international corridors.

Blockchain?

SWIFT has made it clear that the service currently does not incorporate blockchain technology – making the speed of payments ever-more impressive. Yet, it’s important to note that blockchain is not a panacea; any payment service must offer speed, transparency, industry-wide connectivity and have appropriate regulatory oversight. SWIFT gpi incorporates all of these without incurring huge costs for banks and their customers.

Harry Newman, SWIFT’s Head of Banking commented on today’s announcement, “Thanks to SWIFT GPI, banks are able to credit payments within minutes and even seconds, while their customers are facing shorter supply cycles and able to ship goods faster. This is a very significant step forward for banks and for their customers” says. “In addition, banks receive fewer queries and have told us their inquiry-related costs are reduced by as much as 50% when they use SWIFT GPI. This is a major service improvement to end-users and a considerable cost saving for the industry.”

Looking Forward

It is clear that gpi service has transformed the way cross-border payments are sent and received, and further enhancements appear to be in the pipeline for 2018. As more banks use the service and integrate it with their corporate offerings throughout 2018, the number of corporates will continue to grow rapidly.

With SWIFT already playing a key role in delivering the New Payments Platform in Australia and introducing real-time payments to Europe later this year, it seems 2018 is shaping up to be a key year for the cooperative and its members.

Carillion collapse shines spotlight on late payments issue

The collapse of construction giant Carillion has focused media and government attention on the global issue of payment terms after it was discovered the group paid subcontractors with a 120-day delay. These delayed payments meant many suppliers had to resort to expensive bank finance to stay in business while others are now facing bankruptcy.

Recognising the importance of ending the culture of late payment, two FTSE 100 chairmen have joined the advisory board of Previse, a UK based company which uses artificial intelligence to solve slow payments for the entire supply chain.

Chairman of supermarket chain J Sainsbury, David Tyler and chairman of property group British Land, John Gildersleeve have joined the company as investors and advisers.

Previse’s AI technology is designed to enable large firms to pay suppliers on the day they receive an invoice. The London-based firm’s technology calculates a buyer’s likelihood of paying an invoice, before deciding which invoices will be paid, so small suppliers can be paid instantly.

David Tyler said: “The length of time it can take for suppliers to be paid hurts not only them, but the large companies buying their products and services as well.” He believes that Previse will bring benefits to the entire supply chain and that the company has a bright future ahead of it.

Mr Gildersleeve, who is also deputy chairman of telecoms company TalkTalk, told the Financial Times that Previse could tackle an issue that has, “infected British business forever.”

Lengthy payment terms and the prevalence of slow payments by large buyers, which affects three in five SME suppliers, cause 50,000 UK SMEs to close each year. Previse’s artificial intelligence technology allows even very small suppliers to receive payment the day they issue their invoice by instantly identifying if an invoice is correct and allowing a funder to pay the supplier immediately based on this information.

“I am proud to be able to welcome our new board members who represent incredible senior experience across such a wide range of industries with significant supply chains.” Said Paul Christensen, CEO of Previse. “I think this shows the deep understanding across industry that slow payments are a real problem, and confidence in our approach to tackling the problem.”

 

Foreign exchange in 2018: David Puth speaks to FX Week

Technology and regulatory guidance and principles will shape the foreign exchange (FX) market’s structure in 2018, according to David Puth, CEO of CLS, in an exclusive interview with FX Week.

2017 saw the publication of the FX Global Code, and a number of leading financial services and technology institutions confirmed their commitment to adopting and instilling its principles. This trend, Puth says, will continue in 2018 as the Global Foreign Exchange Committee publishes its final guidance on Principal 17 covering “last look”.

2018 will also be a year in which CLS expands its role offering new solutions to improve efficiency and reduce risk in the FX market.

“We are becoming more than a settlement utility. While delivering the risk mitigation that comes with safe settlement is our primary mission, we continue to focus on delivering products that solve client problems,” says Puth.

These include a same-day settlement service for five of the world’s most liquid currencies, and its much-anticipated distributed ledger technology (DLT) enabled netting service, CLSNet.

These technologies will likely have a significant impact on FX market structure, helping it to become more efficient and speed up the movement of currency around the world.

For more on what 2018 holds for FX, including David’s thoughts on the dollar and bitcoin, read the full interview here.

Defining the FX Flash Crash

On the 15th January 2015, the euro crashed 20% against the Swiss franc in a matter of moments, before recovering rapidly. Similarly, on 7th October 2016, sterling plunged in value by over 9% against the dollar, again regaining most of its value minutes later.

These are amongst the most famous examples of the market phenomena know as the ‘flash crash’, but they are by no means the only examples. In fact, according to a study by algorithmic trading technology provider, Pragma, which aims to help monitor and track the prevalence of flash crashes, there were some 69 flash crashes in 2015 and 2016. Almost one a fortnight.

The causes of these market phenomena are unknown. It has been suggested that flash crashes are the result of ‘fat-fingered traders’ or lapses of human judgement. After the pound sterling incident, the Bank of International Settlements (BIS) released a report which suggested technical error as a possible cause.

However, as most research has considered these events as of one-off incidences, drawing generalised conclusions has been difficult. Without other flash crashes to compare, it is not possible to tell which variables in a complex market are contributing to the crash and which were incidental. For example, some commentators have suggested that a principal cause is algorithms overreacting to news events, but further study has found no particular correlation between other flash crashes and news events.

This is where Pragma’s research is vital. It has analysed two years of tick by tick foreign exchange data to identify and catalogue all instances of flash crashes across numerous major currencies between 2015 and 2016. To do this, it has developed a precise, quantitative definition of the flash crash.

Previously, the BIS described a flash crash as a ‘large, fast, V-shaped price move and a sudden widening of bid-offer spreads,’ the V-shape implies a reversion of the price after the initial price move. Pragma’s definition builds on the BIS’s and defines a flash crash as having a:

  • Large price move ( 13x than normal price volatility)
  • Widening bid-offer spread 2x normal)
  • Strong price reversion ( 70% price reversion)

Using this standard, the examined time period had 69 instances of what would be considered a flash crash.

This dataset allows industry analysts and academics to more accurately examine the causes of flash crashes and what effects such as changing technology, regulation and industry practices are having on market quality going into the future.

For now, the causes of flash crashes remain unclear. But Pragma’s research provides an important foundational step in moving the market towards a more full understanding of this market phenomena.

For more information, you can request Pragma’s research report here. You can also read more about the report on Bloomberg and Reuters.

J.P. Morgan deploys Mosaic Smart Data for fixed income data analytics

As a recent piece in the FT pointed out, traders are searching for ever more inventive data streams to try to make better predictions about their market or get an edge over the competition. Whether that be advanced social media analytics, algorithms to read the news or even using drones and satellite images to look at factories, banks, and hedge funds are investing significant amounts in collecting and analysing data.

But, banks know that there is a vast wealth of data created and stored within the institution created simply through the normal course of the trading day. This is free, and it is completely proprietary.

The problem is, data within the bank is distributed across desks, systems and messaging languages. Bringing that all into one, aggregated and standardised form so that the algorithms can work their magic and deliver valuable insights is a herculean task.

But that is exactly what Mosaic Smart Data has announced it is doing J.P. Morgan.

By using sophisticated historical, real-time and predictive analytics algorithms, the Mosaic’s platform will provide, in the first instance, J.P. Morgan’s rates, sales and trading business with advanced tools to accurately provide tailored client service. This innovative technology enables users to better visualise and anticipate market and client activity and thereby offer better service. It can also reduce the cost and complexity of compliance.

“Having a more holistic view of trading data will improve our service delivery for clients.” Said Troy Rohrbaugh, Global Head of Macro at J.P. Morgan. “The Mosaic platform integrates securely with our existing technology infrastructure, and enables our teams to quickly make better-informed decisions.”

Once these fundamentals of a data analytics platform are in place. Mosaic can roll out advanced machine learning and predictive analytics which will help sales teams to predict their clients’ behaviour, allowing them to better facilitate client needs and improve their performance.

“Data analytics and artificial intelligence are changing the face of investment banking.” Says Matthew Hodgson, CEO, and founder of Mosaic Smart Data. “Banks understand that the insights locked away in their transaction and market data are potentially some of their biggest competitive advantages. They already have the raw materials, but MSX® gives them the tools to aggregate and standardise that data and put it to work intelligently.”

Thousands descend to Toronto as Sibos 2017 gets underway

Thousands of delegates flew in from around the world to Sibos to network, debate and discuss topical issues relating to business, technology and finance. The four-day annual event is organised by SWIFT, the global member-owned cooperative and the world’s leading provider of secure financial messaging services.

Sibos has a track record in attracting the highest calibre of speakers, and this year is no different. David McKay, President and Chief Executive Officer at RBC, was the chief guest speaker for the opening SWIFT plenary. He addressed a full audience alongside SWIFT’s Chairman of the Board, Yawar Shah, and SWIFT’s CEO, Gottfried Leibbrandt. Between them, they touched on the key events during the past 12 months, the industry challenges ahead, and SWIFT’s role in addressing them.

Fintech, transaction banking, blockchain, SWIFT gpi and financial crime compliance all featured on the agenda for day one, and announcements from SWIFT relating to the latter two sparked the interest of a few observers.

Anyone working in the B2B payments space, be it a bank, a corporation or a technology vendor, will be aware of SWIFTgpi. It was announced today that SWIFTgpi surpassed two million payments last month – rapidly becoming the new standard in cross-border payments.

More than 120 leading transaction banks, representing over 75% of all SWIFT payments, are signed up to the service. By doing so, they are utilising the innovative payments Tracker, a cloud-based application accessible via APIs. Banks embed the gpi Tracker information into their payments flow applications and front-end platforms, allowing their customers to track gpi payments in real-time.

This addresses a serious bugbear. Traditionally, when a corporate treasurer sends a request for a cross-border transaction to a bank, they have no visibility of what actually happens with that request. Treasurers often liken this to a “black hole”; they have no view as to when payment finality occurs or its final costs. This can lead to problems with suppliers or end-customers, not to mention increasing financial risks resulting from payment delays or non-compliance with regulatory requirements.

For all of the blockchain aficionados out there, SWIFT also confirmed it will provide a sneak peek of the results from the DLT proof of concept (PoC) relating to SWIFTgpi during Sibos, ahead of its conclusion in November.

Harmonsing international compliance standards

A major announcement relating to SWIFT’s Compliance division also became a topic of interest. SWIFT’s Know Your Customer (KYC) Registry, utilised by thousands of banks around the world is being aligned with the new Wolfsberg Due Diligence Questionnaire (DDQ) for Correspondent Banks.

This is the latest in a long line of close collaboration between SWIFT and Wolfsberg to address a broad range of compliance challenges facing the correspondent banking community and beyond. The Wolfsberg Group is a member of SWIFT’s Financial Crime Compliance Advisory Group and is made of thirteen global banks. It aims to develop frameworks and guidance for the management of financial crime risks, particularly with respect to KYC, AML and Counter Terrorist Financing (CTF) policies.

The Wolfsberg DDQ has been updated in response to an increase in regulatory expectations. Aligning the Registry with the Wolfsberg DDQ ensures coverage of up to 90 percent of the information correspondent banks typically require for KYC compliance, delivering major time and cost savings. By answering every Wolfsberg DDQ question directly on the KYC Registry, members benefit from increasing transparency and streamlined due diligence processes.

So, all in all, it looks like a busy but successful day at Sibos so far. Stay tuned on all things related to Sibos by following @Sibos, @chatsworthcomms or search #Sibos2017.

FX trading volumes rebound from summer lull

CLS’s currency trading volumes saw a significant uptick, as volatility in the foreign exchange (FX) market bounced back in September.

Following a bumpy period in geopolitics over the summer, trading activity rose strongly to almost USD 1.750 trillion in last month, according to the largest provider of settlement services in the global foreign exchange market.

Data from CLS showed a 10.7 percent month-on-month increase in the number of trade instructions submitted in September from USD1.581 trillion in July 2017.  This also represents a very significant 15.9% increase from this time last year, when volumes totalled USD1,514 trillion.

CLS’s figures reflect the trend observed in the monthly figures from many of the major trading platforms. However, given its position as a central settlement hub for the wholesale market, CLS provides the most comprehensive snapshot of activity, encompassing data from 18 global currencies and approximately 21,000 trading entities around the world.

 

 

 

 

 

 

Mosaic shortlisted for fintech company of the year by City AM

Congratulations to the Mosaic Smart Data team which has been named in this year’s top five fintech companies in the City AM awards.

The awards celebrate the best of The City in an aim to identify ‘the most bold, successful, and principled companies and individuals’ of the year. The fintech category recognises some of the most innovative British fintech successes, and celebrates London’s role as one of the world’s centres of fintech excellence.

Mosaic was shortlisted as one of the top five categories by City AM’s editorial staff who, announcing the shortlist in the daily paper, described it as “one of the best financial services tech innovations of recent times”.

With financial institutions facing a challenging period in FICC markets, Mosaic allows banks to see how their entire FICC business is performing in real time and help traders identify much-needed liquidity in FICC markets.

As the volume of data linked to trading activity and interactions with clients increases, the challenge to harness and analyse that data in real time becomes ever more critical. Mosaic Smart Data understands that the true value of data comes not only from the intrinsic individual data streams themselves, but also from the correlations and inferences that can be drawn from the aggregated data from each client.

Its cutting-edge technology addresses the challenges facing institutions trading in today’s FICC markets, including change management, productivity, efficiency, restructuring and the growing automation of trading processes.

The final winners of the City AM awards will be chosen by a panel of prestigious judges from the world of business, including Virgin Money boss Jayne-Anne Gadhia, WPP’s Sir Martin Sorrell and Sky News’ highly experienced City Editor Mark Kleinman.

We wish Mosaic the best of luck for the awards ceremony, which will be held on 9th November at Grange St Paul’s Hotel.

SWIFT and Chatsworth leading the debate at SIBOS, 2017

The Chatsworth team is proud to be supporting SWIFT at SIBOS, the world’s premier financial services conference, exhibition and networking event. What started out as a banking operations seminar in 1978, has grown into the premier business forum for the global financial community to debate and collaborate in the areas of payments, securities, cash management and trade.

Organised by SWIFT for the financial industry, Sibos has brought financial leaders together, over four decades, to network, collaborate and make sense of changes in the industry, helping to build an understanding of the forces affecting the financial community. 

 SWIFT is all about connectivity. The organisation remains the world’s leading provider of secure financial messaging services, providing a platform for messaging, standards for communicating and products and services to facilitate access and integration; identification, analysis and regulatory compliance.

 The organisation connects more than 11,000 banking and securities organisations, market infrastructures and corporate customers in more than 200 countries and territories. Headquartered in Belgium, SWIFT’s international governance and oversight reinforces the neutral, global character of its cooperative structure.

 The Chatsworth team will be in attendance throughout the event in Toronto, where the team will be working to support SWIFT in highlighting the challenges facing the financial eco-system and how their connectivity and experience can help. Chatsworth’s CEO will also be moderating some of the panel debates.

Get in touch

Email: swift@chatsworthcommunications.com   

Twitter: @chatsworthcomms

We look forward to seeing you there. 

Compliance stream at Sibos will explore implications of rapidly changing geopolitical and financial crime environment

Experts and regulators to address the new normal in sanctions, counter-terrorist financing, anti-money laundering, fraud, and cyber security

Sibos introduces a stellar line-up throughout the Compliance stream at this four-day event in Toronto. Multiple sessions will address the profound impact of the shifting geopolitical, financial crime, and cybersecurity environment. Panel debates and deep-dive sessions will cover topics such as the future of financial intelligence sharing; counter terrorist financing in the ‘lone wolf’ era; the potential of artificial intelligence to improve sanctions and AML compliance; and the fraud and cyber-crime ‘new normal’.

An ‘in conversation’ panel with Wolfsberg Group members will unveil the coming year’s priorities and trends. A Latin America-focused panel will provide an overview of the region’s banking compliance challenges.

Notable speakers participating in this year’s Compliance Forum include:

  • Jennifer Calvery, Global Head of Financial Crime Threat Mitigation, HSBC
  • James Freis, Chief Compliance Officer, Clearstream Banking
  • William Fox, Managing Director Global Head of Financial Crime Compliance, Bank of America Merrill Lynch
  • Neil Isford, General Manager, Watson Financial Services Solutions, IBM
  • David Lewis, Executive Secretary, FATF
  • Jerry Perrullo, Chief Information Officer, ICE
  • Denise Reilly, Wolfsberg member, Global Head of Anti-Money Laundering, Citi

Must-attend sessions include:

Counter-terrorist financing- are we really stopping the bad guys – 17 October at 9:30

Panelists will explore how can banks – and governments – adapt to stay one step ahead of the bad guys, what is working and what needs to work better, and whether stringent regulations are pushing legitimate actors outside of the financial system without actually preventing acts of violence.

Fraud and cyber high alert: The new normal? – 18 October at 9:30

As high-profile security breaches continue to reverberate, this panel discussion of experts from a range of industries will discuss the benefits gained from collaboration, the landscape of payment risks, and the skills that must be developed and recruited to protect institutions and the industry.
“In conversation” with Wolfsberg – Pressing priorities and trends 18 October at 15:30

A lively discussion with Wolfsberg representatives will discuss the industry’s latest challenges, trends, and the coming year’s priorities.

Read more about the Compliance stream on Sibos.com.

The Sibos streams enable attendees to build their Sibos agenda around the topics of interest to them.

Other Sibos Streams and Tracks include:

Banking

Technology

Securities

Standards Forum

Artificial Intelligence

About Sibos

Sibos is an annual conference, exhibition and networking event organised by SWIFT for the global financial industry. Next month, some 7,000 decision makers and topic experts from financial institutions, market infrastructures, multinational corporations, and technology partners gather in one place to do business and collectively shape the future of payments, securities, cash management and trade.

When: Monday 16 October – Thursday 19 October 2017

Where: Metro Toronto Convention Centre (MTCC)

Website: www.sibos.com

Contact: JoAnn Healy | Press@Sibos.com | +1 212 455 1802

Get your complimentary Sibos Press Pass today

Accredited journalists are welcome to attend Sibos free of charge. To obtain your complimentary press pass for Sibos 2017 Toronto, contact: Registration@Sibos.com.

Don’t miss your chance to be right in the middle of the news at the premier financial services event of the year.

Follow us on Twitter: @Sibos #Sibos

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Top Canadian FinTechs to feature at Sibos 2017

 32 FinTech startups have been selected to participate in Sibos.

According to figures highlighted by the Toronto Financial Services Alliance (TFSA), Canadian investment activity in the FinTech sector from angel investors, Venture Capitalists (VCs) and corporate VCs increased from US$87.21 million in 2012 to US$367.51 million in 2016.

This doesn’t come as a surprise – the country has long been a pioneer in the digital arena. This extends back to the creation of the first truly smart smartphone, and the establishment of the world’s first Bitcoin ATM in Canada in 2013.

There are now hundreds of innovative FinTech companies, spread across Canada’s major FinTech hubs – Toronto, Calgary, Montreal and Vancouver.

These hubs are making a name for themselves on the world stage. For example, Vancouver has moved up 16 spots on the Global Financial Centres Index (GFCI) from #33 in 2008 to #17 in 2017. And in 2016, The Banker magazine ranked Toronto second amongst North American financial centres and 8th in the world.

Meanwhile, in Montreal, over 2,000 students graduate each year with degrees in Finance, adding to the nearly 100,000-strong talent pool that drives financial services in the city. And there are 1,556 financial services businesses in Calgary, where the Top 10 investment banks all have a presence.

To help some of the best local FinTechs showcase their solutions to a global audience, the Canada Lounge at the Metro Toronto Convention Centre (MTCC) will host 32 Canadian FinTech startups throughout the Sibos week. The Canada Lounge will be located in the Discover Zone (Level 600).

The startups will rotate throughout the week. Each day, there will be eight startups present in the Canadian FinTech Corner section of the Canada Lounge. Delegates will be able to interact with them to learn more about their offering, and how they may be able to help your business.

 

 

 

 

Burberry continues to set the standard

Chatsworth stopped by Burberry’s take over of the Old Sessions House, soon to be London’s hottest new club and restaurant venue, near our office in Clerkenwell. 

The British brand is hosting a photographic exhibition curated by president and chief creative officer Christopher Bailey, entitled ‘Here We Are’, with the accumulated work of over 30 social and documentary photographers who made their aesthetic mark on the 20th Century.

Burberry remains a real case study for smart integrated brand communications, using digital channels, event space and marketing to remarkable effect. 

Marketing by association and advocacy is a clever technique and Burberry use this to the max by curating both new and established art and music to reinforce their own creative work. 

As they say, it’s the company you keep. Great brand, great reputation.

Closing speaker at Sibos 2017 confirmed: Microsoft CEO Satya Nadella set to take centre stage

Those that haven’t registered for the event now have an added incentive to do so

Sibos has an excellent track record of attracting the great and the good from the technology and business world. More than 8,000 decision makers and topic experts from around the world are expected to descend on Toronto next month from 16-19 October.

Over the years, Sibos has become known for attracting the highest calibre of speakers to lead and facilitate discussions on the future of business, technology, payments, securities and regulation –and the four-day event is now a staple on the calendar of many executives.

Those that haven’t registered for the event now have an added incentive to do so. Earlier today, it was announced that one of the most high profile executives from the technology world, Microsoft CEO Satya Nadella, will deliver the closing plenary address on Thursday 19 October.

Satya Nadella was named Microsoft’s CEO in February 2014, but has been with the company since 1992. During his 25-year tenure, he has established himself as a technology visionary who quickly became known as a leader across a breadth of technologies and business lines.

Under his direction, Microsoft has switched its centre of gravity from its Windows operating system to Azure – its global cloud computing business – which has grown to become the centre-piece of more than 100 data centres around the world.

Today, its technology underpins a range of web-based applications, bringing mobile devices to life and crunching data for artificial-intelligence (AI) services, according to The Economist, which published an excellent profile article on Nadella and Microsoft earlier this year.

His speech at Sibos will focus on how technology is profoundly impacting every aspect of our society and economies.

“For over two decades, Satya has been at the forefront of the tech revolution, and worked at the heart of one of the defining companies of this century. He knows what it takes to build an innovative and game changing company, and that harnessing disruptive technologies is crucial to enabling businesses to remain relevant and competitive in an ever-changing world.” said Sven Bossu, Head of Sibos.

“The financial services industry is currently undergoing its own tech revolution, which has created huge challenges but also opportunities. During the closing plenary, we look forward to Satya sharing his experiences with delegates to inspire them to build a stronger future for financial services.”

Microsoft’s share price has also risen by an impressive 60% under his leadership. With 8,000 people expected to walk through the doors of the Metro Toronto Convention Centre (MTCC), there will be plenty of ears listening intently to his words of wisdom.

Sibos 2017 is shaping up to be an unmissable event. To explore this year’s programme, and to register, visit Sibos.com.

The Clearing House and SWIFT move closer to instant payments in the US

US banks will have option to connect to The Clearing House’s real-time payments system via SWIFT gateway

A major evolution is underway in the US payment infrastructure. Many participants in the world’s largest financial market are keenly awaiting the development of a new clearing and settlement system from The Clearing House (TCH) to support domestic instant payments in the US.

Once complete, the service will allow consumers and businesses to send and receive payments in real-time, and directly from their accounts at financial institutions. It will also include data and non-payment messages that financial institutions can use to build digital commerce solutions.

As instant payments become more ubiquitous in the US, the world’s largest payment messaging system, SWIFT, announced it will provide US institutions with a gateway to The Clearing House’s real-time payments (RTP) platform.

SWIFT’s solution for the U.S. market will provide banks with the opportunity to leverage a single platform, Alliance Messaging Hub (AMH). This will provide an interface for managing the requirements of sending and receiving domestic instant payment transactions for both SWIFT high-value payments and low-value TCH real-time payments on behalf of customers.

AMH is an orchestration layer that includes a gateway to the TCH RTP network, as well as other gateways and API’s which allow financial institutions to connect to other non-SWIFT networks. Financial institutions can leverage AMH to support instant payments, simplifying adoption to our customers.

As reported by International Business Times, on the significance of the gateway, Ignacio Blanco, SWIFT’s director of strategic relationships said:

“SWIFT is working together with communities worldwide to support the global shift towards real-time payments, and we are pleased to be at the forefront as the U.S. market evolves. The Clearing House is making great strides in accelerating the speed of transactions, and we are committed to playing our part in helping the financial community to operate as efficiently as possible.”

Steve Ledford, SVP Product and Strategy at The Clearing House, also explained why TCH selected SWIFT as a partner:

“Given its reach and expertise in payments, SWIFT is a great collaborator as we bring a wide-scale real-time payments system to the U.S. market. Achieving our vision of broad adoption of real-time payments will only be possible when the majority of U.S. institutions are able to participate, and SWIFT will be instrumental in helping us meet this goal.”

The solution will be commercially available by early 2018. But as IBT notes, SWIFT’s global instant payments strategy is burgeoning, and the US announcement builds on SWIFT’s earlier success in Australia and in Europe.

In 2015, SWIFT was awarded the contract to deliver the messaging infrastructure to underpin Australia’s new payments platform, NPPA, which is expected to go live later in 2017.

Earlier this year, SWIFT announced the launch of an instant payments messaging solution, first for the European market, and elsewhere. It will allow instant payments to be made over the SWIFT network and provide customers with a single gateway to connect seamlessly to multiple instant payments systems.

It will offer connectivity to the Eurosystem’s TARGET Instant Payment Settlement (TIPS) and will support the delivery of the future Eurosystem single gateway to TIPS, TARGET2 (T2) and TARGET2 for Securities (T2S) platforms.

With new technologies and start-up companies emerging in recent years and seeking to transform the wholesale and retail payment infrastructure, it seems one of the original pioneers is taking promising steps once again to re-design the global payment infrastructure once again.