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Chatsworth congratulates Pragma and Cobalt on FX Week e-FX Award wins

Leading industry trade publication FX Week has announced the winners of its prestigious e-FX Awards, which included two of Chatsworth’s foreign exchange clients.

The awards recognise firms from across the foreign exchange industry for their excellence and innovation in the world’s most liquid financial market.

Announcing the award winners, FX Week editor Eva Szalay said technology in the market was “booming”, pointing out that “innovation has been extended to small start-ups, as well as the largest players” and highlighted the market’s “genuine desire to become more transparent, more competent and highly innovative”.

Innovation was certainly in evidence from algorithmic trading technology provider Pragma Securities, which was named Best independent algorithmic trading technology provider, and post-trade distributed ledger technology company Cobalt, which was awarded e-FX initiative of the year award.

Pragma

Reflecting on the increasing sophistication amongst the buy-side and the push for best execution in FX, Pragma has seen rapid growth and expansion over the past 12 months.

The company serves banks, brokers and sophisticated buy-side institutions, and identifies its value proposition around transparency and control as differentiating features.

It added a number of new capabilities to its Pragma360 algorithmic trading platform. This includes algorithmic trading non-deliverable forwards (NDFs), which offers traders better execution when investing in popular emerging market currencies.

It has also expanded its international client base through a new connectivity presence at Equinix’s LD6 data centre in London, providing lower latency connection to London based FX matching engines.

Cobalt

Cobalt has a very eye-catching proposition – it uses distributed ledger technology to cut 80% of the costs of post-trade reporting.

Founded by former Traiana executive Andy Coyne, and Adrian Patten, the company is offering to completely revolutionise the costly and time-consuming way in which post-trade FX services are conducted, cutting out duplication by storing records of all transactions on a single distributed ledger.

“I think if we are successful, the biggest impact will be on trading and Cobalt will increase volumes. Post-trade costs are a tax on trading and the idea that you can charge someone 50 cents to a buck for sending an unencrypted message to the back office is ridiculous.

“So if we can reduce those costs by dollars per transaction, that will feed into increasing volumes,” Patten tells FX Week.

The team at Chatsworth would like to congratulate both Cobalt and Pragma on their well-deserved award wins.

Previse completes a seed funding round worth £2 million.

Small businesses are the backbone of the UK economy, generating some 50% of private sector turnover and employing three out of five private sector workers.

However, these businesses are held back by late payments from their large corporate clients. With 60% of SMEs paid late by corporates, businesses are left strapped for cash to meet their own payment obligations, such as wages, stock and rent. This cash flow crisis forces 50,000 UK companies a year to go to the wall. 

Banks play a role in easing the problem, offering larger suppliers short-term financing or buying the invoices directly from suppliers for a substantial discount, a practice known as factoring. Both these solutions are expensive for the supplier, however, which pushes up prices for the whole payments chain. In addition, given the fragmented and high-risk nature of the SME credit market, only the largest suppliers are able to secure credit.

This means that, according to the world bank, there is $2.4 trillion in unmet demand for financing from SMEs globally.

Enter Previse. The company, which this week announced the successful completion of a £2 million seed round, is harnessing the power of artificial intelligence (AI) technology to allow banks to meet the financing needs of SME suppliers in a scalable and low-risk way.

Previse uses advanced AI and hundreds of millions of data points to score the likelihood that a corporate buyer will be able to pay a supplier’s invoice. This score is then provided to banks and other funders who use that information to instantly pay the SME on behalf of the large corporate. The supplier receives their money the day they issue their invoice, giving them complete cash flow confidence.

The effect is that “instant, frictionless and efficient payments become the new standard for B2B payments,” according to Paul Christensen, co-founder and CEO of Previse.

The rest of the payments chain benefits as well. By offering such a service, buyers can negotiate a discount on their purchasing costs and banks can reach much deeper into the SME credit market without blowing their risk exposure. The net effect could be a several billion-pound boost to the UK economy every year.

To find out more about Previse seed funding please click here

Chatsworth is proud to support London Tech Week

Chatsworth is proud to support London Tech Week and the vision to create the world’s leading smart city.

With Brexit and an uncertain outcome in the UK election this month, a cloud has continued to loom large over the UK economy. Frankly, we’re a little over all the doom and gloom so we’re happy to report that one industry that continues to thrive in the midst of uncertainty is the UK’s financial technology (fintech) sector.

London remains Europe’s leading city for foreign direct investment into the technology sector, attracting significantly more investment projects than any other European city, in each year during the last decade.

The Chatsworth team knows “a bit” about FinTech. We’ve specialised in it for over a decade and it remains our pinpoint focus.

We set up in London before expanding across the pond and we’re delighted that international investors rank London as a leading global tech hub, with London featuring in the three highest ranked cities with the potential to produce the next global tech giant.[1]

This week, the sector received a further boost of confidence from Sadiq Khan, Mayor of London, who launched London Tech Week, a week-long celebration promoting London’s role at the epicenter of innovation and technology.

This year’s festival is expected to be bigger than ever before and attract more than 50,000 visitors to hundreds of events across London. Artificial Intelligence (AI), connected vehicles, and regtech are just some of the events on the agenda, alongside a range of networking opportunities. The full program of events for the week is available here.

Speaking at the annual event, the Mayor outlined his vision for London to maintain its influence and expertise, and become “the world’s leading smart city”.

He also reassured the global tech community that London remains open to talent and investment from all over the world, pledging to do everything in his power to safeguard London’s global competitiveness and status as a leader in innovation…

Since its launch in 2014 London Tech Week has included more than 700 events and has welcomed delegations from around the world. Congrats once more to all involved.

Chatsworth client R3 secures record-breaking USD 107 investment in distributed ledger technology

We are delighted to announce that Chatsworth client R3 has secured one of the largest ever Series A investments in the global fintech industry, raising USD 107 million from over 40 institutions across the globe.

R3 is leading a consortium of banks and other financial institutions working together to develop a new operating system for the financial services industry based on distributed ledger technology (DLT), which was borne out of blockchain – the infrastructure that enables the transfer of virtual currencies such as Bitcoin.

Chatsworth has handled global PR for R3 since its launch in September 2015. During the last eighteen months we have worked closely with the financial, business and technology media to raise awareness and understanding of R3’s unique approach and technology as it sought to grow its network of members and investors.

Drawing on R3’s team of expert spokespeople, Chatsworth positioned the company and its members as thought leaders in this revolutionary technological field, securing thousands of pieces of coverage including tier 1 outlets such as the Wall Street Journal, FT, Bloomberg, Reuters and the Economist. R3 is now widely seen as the leading voice on distributed ledger technology, with its spokespeople regularly called upon to provide expert commentary in the press.

The awareness generated by this coverage helped fuel the momentum to drive R3’s growth from a fintech startup with eight finance and technology veterans and nine bank members to a global team of 110 professionals serving over 80 global financial institutions and regulators on six continents.

This massive investment marks the next stage in R3’s evolution. Many of the world’s largest financial firms have come together not just with capital support, but with a robust commitment to work with R3 in developing foundational industry solutions that will be the building blocks of the new financial services infrastructure.

We look forward to continuing our work with R3 as they take distributed ledger technology off the drawing board and onto the trading floor.

Cybersecurity: Is a flaw in human psychology to blame?

A fascinating analysis of cybercrime and cybersecurity this week from Michael Daniel, the president of The Cyber Threat Alliance.

Writing in the Harvard Business Review, Mr Daniel postulates that we have only just begun to comprehend the scale of the issue and that it is our perception of the online world versus the physical which is to blame.

Cyberspace operates according to different rules than the physical world and is more than just a technical problem, but is as much about economics and human psychology.

“The borders in cyberspace don’t follow the same lines we have imposed on the physical world –  they are marked by routers, firewalls, and other gateways. Proximity is a matter of who’s connected along what paths, not their physical location. The same principles of cyberspace that allow businesses to reach their customers directly also allow bad guys to reach businesses directly”

He poses six key framework questions which he argues need answering before we can effectively tackle the problem:

  • What is the right division of responsibility between governments and the private sector in terms of defence?
  • What standard of care should we expect companies to exercise in handling our data?
  • How should regulators approach cybersecurity in their industries?
  • What actions are acceptable for governments, companies, and individuals to take and which actions are not?
  • Who is responsible for software flaws?
  • How do we hold individuals and organisations accountable across international boundaries?

In our experience, financial firms which are typically hyper-competitive are highly adept at solving industry issues when they recognise the group threat and work together.

Co-operation and co-ordination across borders backed by resolve, human capital and investment is key to solve these issues is critical.

The financial systems, both systemically and at the individual firm level, remain at risk and it is clear that any system is only as strong as its weakness link.

Mark Carney on realising the potential of fintech

Regulatory support for the growth of fintech in London has certainly been evident in recent years.

Democratisation of financial services, greater consumer choice, lower costs and greater resilience of financial infrastructure are just some of the reasons why the Bank of England (BoE) is encouraging financial technology (fintech) development in the UK.

That’s according to Governor Mark Carney, who addressed an audience of fintech entrepreneurs, regulators, politicians and banks at the UK Treasury’s inaugural International Fintech Conference in London.

Regulatory support for the growth of fintech in London has certainly been evident in recent years. The Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) have changed their authorisation processes to support new business models, and the BoE also established a fintech accelerator last year.

To date, it has worked with a number of firms on proofs of concepts relating to cyber security, using artificial intelligence (AI) for regulatory data, and distributed ledger technology.

But what is interesting in this speech is the BoE’s focus on ensuring “the right hard and soft infrastructure are in place” – a central plank of the Governor’s vision of maintaining London’s role as the centre of fintech excellence.

“Over the centuries, we have learned that markets and innovation thrive with the right hard and soft infrastructure”, he said. “Hard infrastructure ranging from transport links to broadband and payments architecture; and soft infrastructure from the rule of law to market practices, codes of conduct, and regulatory frameworks.”

So how does this relate to fintech, one may wonder? Governor Carney continued: “With respect to soft infrastructure, the Bank is assessing how fintech could change risks and opportunities along the financial services value chain. We are then using our existing frameworks to respond where necessary.”

On developing the right “hard infrastructure”, Carney pointed to how the BoE is working to develop the financial system’s hard infrastructure to allow innovation to thrive while keeping the system safe. In particular, he highlighted how it is widening access to some of its systems to include Payment Service Providers (PSPs) in order to boost both competition and system resilience.

“The UK has led the world in innovation in the wider payments ecosystem. And we are committed to keeping pace with customer demands for payments that are seamless, reliable, cheap, and ubiquitous. Our challenge is how to satisfy these expectations while maintaining a resilient payment systems infrastructure.

“That’s important because the Bank operates the UK’s high-value payment system ‘RTGS’ (Real-Time Gross Settlement) which each day processes £1/2 trillion of payments on behalf of everyone from homeowners to global banks. Understandably, we have an extremely low tolerance for any threat to the integrity of the system’s “plumbing”.

“Currently, only 52 institutions have settlement accounts in RTGS. Indirect users of the system typically access settlement via one of four agent banks. These indirect users include 1,000 non-bank PSPs at the front-end of the financial services value chain. As they grow, some PSPs want to reduce their reliance on the systems, service levels, risk appetite and frankly goodwill of the very banks with whom they are competing.”

Interestingly, the BoE has decided to widen access to RTGS to include non-bank PSPs in order to help them compete on a level playing field with banks, and is working with the FCA and HM Treasury to make this a reality.

This ties in with Carney’s final example of the “soft and hard infrastructure” – coordinating advances in hard and soft infrastructure ensure the Bank can help the industry realise the true promise of fintech.

“New technologies could transform wholesale payments, clearing and settlement. In particular, distributed ledger technology could yield significant gains in the accuracy, efficiency and security of such processes, saving tens of billions of pounds of bank capital and significantly improving the resilience of the system.”

A full copy of Mark Carney’s speech is available here.

Regtech is booming, but is the UK missing out?

Regtech (n). Short form for the regulatory technology being created to meet regulatory monitoring, reporting and compliance.

Regtech is booming, with USD 2.99 billion invested globally across over 400 private investment deals in the last five years.

Yet despite its predominant position in almost all other areas of financial technology, the UK is still lagging behind the US when it comes to regtech investment.

Just 9% of the almost three billion invested since 2012 went to UK based companies, according to the CB Insights figures. This put it a distant second behind the US, which scooped up 78% of the total investment.

Banks are looking to reduce costs to cope with a tougher investment market and find ways to handle the flood of new rules which the January MiFID II deadline will unleash. In this environment, it is little wonder investors see the potential for technologies which promise to make compliance easier, more efficient or more reliable for the financial sector.

UK regulators appear to have spotted the opportunity as well, and the Financial Conduct Authority (FCA) is looking to do what it can to help the UK’s regtech sector catch up with its transatlantic counterpart.

The regtech industry spans a wide variety of technologies and the industry which promises to make compliance easier, more efficient or more reliable. Some companies are using artificial intelligence to help banks comply with regulation, while the R3 group of over 40 banks is looking at how distributed ledger technology (DLT) can make reporting to regulators simpler.

Some regtech firms believe that Brexit could be a big boost to the UK’s regtech industry.  With the UK’s financial sector’s relationship with the EU now in flux, both in terms of regulatory equivalence and cross boarder trade, ““Brexit is a brilliant opportunity”, sais Diana Paredes, CEO of regtech start-up Suade.

The UK regulator, the Financial Conduct Authority (FCA) has also been working to encourage the UK regtech sector. The FCA’s executive director of strategy and competition, Chris Woolard, is keen to stress the role regtech companies can play. Talking to Financial News, he said, “It’s something quite positive where firms are taking quite seriously how they apply technology to their own compliance question.”

The FCA has also been leading the way when it comes to nurturing innovation. “There are other regulators around the world that have more funds and resources, and other regulators with more powers. But it was really only the UK financial regulator that has built into its governance a mandate to promote innovation and competition, as well as the traditional mandates of financial stability and consumer protection,” Imran Gulamhuseinwala, EY’s global leader for fintech, told the Financial Times.

Most notably, in 2015, the FCA launched its ‘sandbox’ to help companies developing new technologies. The sandbox allows banks firms which require regulatory approval before being able to operate their technology to test in a live environment. This allows firms which would otherwise need to develop their full technology and achieve FCA approval before fully testing their product, to develop their technology in a way which is responsive to both the FCA’s requirements and the demands of live operation.

So far, the sandbox service has proved popular with 69 companies applying for the first cohort in 2015 and a further 77 applying for the second cohort, according to a recent statement from the FCA. Following the success of the first cohort, the FCA has begun helping regulators across the globe to develop their own sandbox programmes, including in Japan, Canada and China.

It is heartening to see the UK regulator supporting this process and creating an environment where the next generation of firms who using technology to enhance the regulatory environment and reporting/confirmation/validation processes.

Financial markets have been buffeted by scandal and repetitional damage of late. It is time to programme some trust into the source code.

London’s post-Brexit future as a financial hub

UK Prime Minister Theresa May finally triggered the formal process for Britain leaving the European Union (EU) on March 29.

While the EU referendum and a post-Brexit scenario may have been something of a blow to confidence in the City, it still has plenty going for it as a financial hub. This year’s Global Financial Centres Index, an international ranking of the world’s leading financial centres, placed London top of the pile.

“London’s rating has been influenced by not knowing what will happen after the UK’s departure [from the EU],” Mark Yeandle, associate director of Z/Yen and author of the report, told The Financial Times. Despite this, London remains top of the list and, over the period which the report tracks, has even recovered some ranking points.

London also remains the world’s biggest FX market by a huge margin, according to the latest BIS Triennial report. While Brexit may result in some jobs being relocated, the industry still believes London will remain front and centre and a key financial hub.

One of the key factors which will insulate London’s FX market is its concentration of trading infrastructure and activity. “When trading becomes concentrated in a particular region and is supported by a comprehensive legal and regulatory environment it develops natural strengths that enable that particular market to function well.” says Dan Marcus, CEO of ParFX, talking to Finance Magnates. “By leaving that pool of liquidity, a firm could disadvantage themselves and their clients.”

This means that, far from vacating the city, many businesses are investing further in London’s future.

Algorithmic trading technology provider Pragma is one such company, with the New York-based firm expanding its equities and FX business to London. “Our investment in the data center at Equinix’s LD6 site offers Pragma360 clients access to state-of-the art technology and the largest ecosystem for foreign exchange trading globally,” says Pragma’s Chief Business Officer, Curtis Pfeiffer.

“Despite the uncertainty caused by Brexit, we are moving forward with this large capital expenditure because London, as the largest FX trading centre in the world, hosts the largest datacentre ecosystem for low-latency FX trading applications and we do not see that changing any time soon,” he explains.

While nothing in the negotiations has been determined at this early stage, the City will also weigh up the potential challenges of Brexit.

Continued access to the European single market through financial passporting and the ability to attract skilled technology professionals from across the EU to work in London top the list for many institutions.

“77% of my staff in London were born outside the UK. We need those people. People are very mobile. I just worry that tough negotiations will send the wrong signal.” Michael Kent, CEO of remittance service Azimo, told Financial News.

In addition, J.P. Morgan has reportedly spent the last nine months weighing up various EU cities as a potential new continental home for their operations, according to The Wall Street Journal.

Looking beyond the headlines, however, the picture is more nuanced. Most of the relocation plans announced over the past few months involve relatively small numbers of staff. For many banks and financial institutions this may be a hedging exercise rather than a wholesale exodus.

Going forward, the UK government is determined to ensure London remains a central part of the international financial landscape, and it’s worth remembering London has a number of strategic advantages which mean it is likely to continue to be the city of choice. It uses the global language of business, English; it is situated in the perfect timezone between Asia and America; and has a legal system that is world-renowned for clarity and reliability.

None of this will change; in fact, it will continue to ensure London remains open and attractive to business.

Can we hardwire trust into our financial systems? SxSW Tech Briefing

This year there were no big headline tech launches to speak of which is unusual for an event which in years gone by saw the launch of Twitter and Foursquare, to take but two.

But this year, the tone and content was quite different. The changing political landscape loomed large, chiefly with the ‘tech under Trump’ work stream but also with keynote speeches from Joe Biden and Corey Booker.

For 2017, the recurring theme was on a pervasive lack of trust and transparency between individuals and organisations, as well as between society and its governments.

Various barometers of sentiment reveal that we are at a historical low for trust in institutions such as banks and the media.

Four panels and presentations focused on the technology variously known as Blockchain or Distributed Ledger and how it can be applied to hardwire and build trust into our systems and interactions.

Discussions ranged from how this tech enables individual contribution, makes it easy to collaborate, decentralises power and creates hope for increasing equality.

There were hands-on workshops and introductions to some of the protocols, coding and design challenges in creating distributed data structures.

As a recap on ‘Blockchain’, it is effectively a record of assets, or any other kind of content, that is shared, replicated and encrypted so it becomes a verified and immutable source of truth. The blocks can’t be modified, but can be viewed, meaning a huge benefit lies in the added trust and transparency that provides.

Dr Tomicah Tillemann, of New America’s Bretton Woods II program is working with his team to apply the principles of blockchain to the US land registry system.

Speaking at SxSW he commented: “Institutions right now provide the facts at the foundation of our reality. I know there’s a land registry somewhere that says I own my house. I swipe my card because I know the bank will transfer the right money for me. As soon as people lose confidence, those systems start to break down really quickly.

“The exciting thing about blockchain is that it has the potential to create a layer of authentication and validation that can’t be tampered with. It’s a layer of reality locked in mathematically, and it’s locked in permanently, which is something we’ve never had before.”

IBM was also in attendance, focusing on the wider potential application of blockchain, announcing a blockchain solution with shipping container giant Maersk to track shipping containers across the world

With over 90% of goods in global trade carried by the ocean shipping industry each year, there are clear benefits to enhancing transparency and sharing information.

From the exchange of money between two parties, to documenting how goods move through a supply chain, and the making of contractual agreements, there are significant savings to be had in terms of cost and time as well as the potential to reduce risk and increase trust.

R3 patent application unveils its vision for future of blockchain technology

R3 executives speak publically for the first time about Project Concord and their vision for the future of blockchain technology.

Distributed ledger and blockchain technology represents a once-in-a-generation opportunity to transform the economics of data management across the financial industry.

However, R3 believes the blockchain and distributed ledger platforms that led to this breakthrough moment were never designed to solve the problems of financial institutions and do not meet all their needs. These include tight linkage to the legal domain, an obligation to prevent client data being shared inappropriately and interoperability with existing financial infrastructure.

As reported in the Wall Street Journal, the R3 blockchain consortium filed a patent for its Corda shared ledger platform.

Corda is the outcome of the analysis R3 undertook on how to achieve as many of the benefits of distributed ledger and blockchain technology as possible but in a way that is sympathetic to, and addresses, the needs of regulated financial institutions.

The platform enables firms to record and process financial agreements using smart contracts, as explained in depth in R3 CTO Richard Gendal Brown’s latest whitepaper.

Corda is part of Project Concord, R3’s overall vision and roadmap for transforming financial services infrastructure. Concord will address challenges such as governance, internal record keeping and regulatory reporting across the financial services marketplace.

With a number of successful prototypes having already been completed on the Corda platform and an alpha launch of Concord scheduled for 2017, the next year looks set to be a turning point in the history of financial technology.

R3 trials blockchain fixed income trading with 40 banks

Chatsworth client R3 CEV has successfully trialed five distinct blockchain technologies in parallel in the first test of its kind, as reported this morning by Wall Street Journal, Forbes and Reuters.

The trial represented the trading of fixed income assets between 40 of the world’s largest banks across the blockchains, using multiple cloud technology providers within R3’s Global Collaborative Lab.

This marked an unprecedented scale of institutional collaboration between the financial and technology communities exploring how distributed ledgers can be applied to global financial markets.

The banks connected to R3-managed private distributed ledger technologies built by Chain, Eris Industries, Ethereum, IBM and Intel. They evaluated the strengths and weaknesses of each technology by running smart contracts that were programmed to faciliate issuance, secondary trading and redemption of commercial paper, a short-term fixed income security typically issued by corporations to raise funding.

Each of the distributed ledgers ran a smart contract based on identical business logic to enable the banks to accurately compare the difference in performance between them. Cloud computing resources were provided by Microsoft Azure, IBM Cloud and Amazon AWS to host the distributed ledgers.

The R3 member banks involved in this trial included Banco Santander, Bank of America, Barclays, BBVA, BMO Financial Group, BNP Paribas, BNY Mellon, CIBC, Commonwealth Bank of Australia, Citi, Commerzbank, Credit Suisse, Danske Bank, Deutsche Bank, J.P. Morgan, Goldman Sachs, HSBC, ING Bank, Intesa Sanpaolo, Macquarie Bank, Mitsubishi UFJ Financial Group, Mizuho Financial Group, Morgan Stanley, National Australia Bank, Natixis, Nordea, Northern Trust, OP Financial Group, Scotiabank, State Street, Royal Bank of Canada, Royal Bank of Scotland, SEB, Societe Generale, Toronto-Dominion Bank, UBS, UniCredit, U.S. Bank, Wells Fargo and Westpac Banking Corporation.

Further exciting developments are set for the months ahead, as R3 continues to work with the banks in its Global Collaborative Lab to test and develop applications based on distributed ledger technology for the financial services industry. The Lab has quickly become a center of gravity for collaborative applied blockchain efforts in the financial services and distributed ledger technology industries.