This presents an opportunity as well as a challenge to the sell-side. If they can help their clients streamline and enhance workflows to reduce manual intervention, minimise errors, and accelerate trading and investment decisions, and if they can provide them with a way to lower operational costs while also enabling fast and profitable responses to market opportunities to better generate alpha, they can gain a serious competitive advantage.

Servicing the buy side ecosystem

With multi-asset strategies becoming more and more common, firms increasingly look to their sell-side providers to facilitate trading across a diverse range of instruments and asset classes through a single interface – whether UI or API – and to handle complex orders involving multiple instrument types, such as structured trades or multi-asset baskets for example, across different trading venues and diverse markets.

There is also an increasing emphasis on data-driven decision-making. While systematic and quantitative traders have always relied on data and models, fundamental and ‘quantamental’ firms are increasingly relying on data-driven insights to drive – or at least support – their investment and trading strategies. Firms now seek from their sell-side providers not only market data, analytics, and research, but also well-documented open APIs that allow them to seamlessly integrate such data into their proprietary models to inform and execute their trading strategies.

“The real challenge for the sell-side is adopting a technology strategy that balances their own internal needs with the ever-changing needs of their clients, one that effectively serves both,” observes Medan Gabbay, Chief Revenue Officer of multi-asset trading solutions vendor Quod Financial. “The buy side have their own technological ecosystem, made up of Portfolio Management Systems, Order Management Systems, applications for creating and managing trading strategies, various types of analytics tools, spreadsheet-based models, and a wide range of other systems they use in their day-to-day trading activities across the front, middle and back office. Forward-looking sell-side firms understand that a key part of their role is to facilitate this ecosystem, by using their technology to help clients trade their chosen markets in the way they want to trade them, as well as providing the necessary analytics and data in a format that helps them identify trading opportunities and manage their investment strategies.”

The key question for the sell side is, how to achieve the necessary agility in technology that will enable them to respond to the changing demands of their clients?

Moving beyond the buy-build debate

Several options exist. There are a number of well-established vendors who sell ‘off-the-shelf’ trading platforms, which can address many of the sell side’s needs. These platforms provide a range of essential features such as liquidity access, connectivity, order and execution management, analytics, and market data handling. However, while such off-the-shelf systems are generally adequate for day one requirements, they often lack the flexibility to rapidly adapt to changing customer needs and the dynamic nature of the markets. Firms relying solely on these platforms might therefore find themselves constantly behind the curve, limited as they are by their vendor’s upgrade and development cycles.

At the other end of the spectrum, firms may opt to build their own bespoke platforms tailored to their own specific requirements.  While this offers maximum control over the design and development process, it’s an expensive and complex undertaking, and is out of reach for most firms, other than tier one banks with substantial technology budgets.

A third option is becoming increasingly popular amongst forward-looking firms, that of buy and build. Vendor platforms that are built on modern, scalable, and adaptable technology, can be quickly deployed to meet a firm’s immediate needs and then adapted, customised and expanded as requirements evolve.

This type of approach offers various benefits, according to Gabbay. “Platforms built on this type of architecture are highly interoperable, easily integrating with other systems on both the front end – through desktop widgets for example – and the back end, through APIs. They are also much more scalable, capable of being deployed on hosted services including Cloud, on-premise, or a hybrid of the two, which leads to improved performance and better customisation to the clients specific infrastructure requirements. Additionally, being built around a component-based architecture, they offer flexibility and allow for rapid customisation, as individual modules can be created and adapted to suit specific customer requirements, new areas of functionality, evolving business processes, or changing regulatory and market structures.”

Gabbay points out that trading platforms architected in this way can also be more easily integrated with clients’ trading desks. This level of integration benefits both the client – for example through more efficient and transparent trade execution and real-time order/position monitoring – and the sell-side firm itself, by providing a better understanding and greater visibility of their clients’ activities and workflow.

For sell-side firms with limited resources, or those that believe their resources can be better invested in creating IP and not rebuilding existing technology, this approach can offer the best of both worlds – the rapid implementation and comprehensive functionality of a vendor platform, together with the flexibility, adaptability, scalability and capacity for integration of a custom-built solution. By adopting such an approach, a firm can distinguish itself from competitors who use generic or outdated vendor platforms, and compete more effectively with larger tier one banks that have developed their own solutions.

Artificial intelligence and machine learning

Another strategic choice for the sell-side is how to make best use of Artificial Intelligence (AI) and Machine Learning (ML). Although neither are new in Capital Markets, interest in AI has exploded since OpenAI introduced ChatGPT in November 2022. Since then, firms have identified a wide range of applications for Generative AI (GenAI) and the use of Large Language Models (LLMs).

One area where GenAI can add significant value in modern, component-based trading platforms, explains Gabbay, is its ability to accelerate the development and testing lifecycle, by automating coding processes and influencing all disciplines involved in defining, building, testing, operating, and supporting complex requirements. This allows firms to bring new functionality to market much more quickly than was previously possible.

“GenAI can generate test scenarios automatically by analysing the code base and understanding the purpose of different components,” he says. “It can then identify potential test cases, simulate different scenarios, and generate test data, thereby eliminating the need for manual test scenario creation. Additionally, by leveraging ML and AI algorithms, it can simulate user interactions, input test data, and validate the expected outputs. This automation reduces the reliance on manual testing, speeds up the testing process, saves time and effort, and improves overall efficiency.”

Outside of GenAI, modern trading platforms can also utilise ML within algorithmic trading, identifying and exploiting patterns in trade execution by analysing market conditions, liquidity, and order book dynamics. By scrutinising vast amounts of historical and real-time order book data to identify patterns and trends, ML-trained algorithms can determine the optimal timing, price, and quantity for executing trades, thus minimising transaction costs and market impact.

ML is also being increasingly used to develop intelligent Algo Wheels. These allow firms to analyse their incoming flow, so that the right execution strategies and order routing destinations can be automatically chosen, and optimised based on current market conditions and client-specific requirements.

Primary considerations for the sell side

Given the numerous challenges that sell-side firms face from a trading technology perspective, and the various choices they have available, what are the key considerations they need to take into account when evaluating trading platforms?

First of all, support and training are vital aspects of any technology implementation. Even the most intuitive platforms require a period of adaptation, and comprehensive training is crucial to maximise their potential. Vendors should provide robust support services to assist with both onboarding and continuous usage. This includes not only technical support but also strategic guidance to help teams leverage the platform’s full capabilities. Adequate training and support ensure that any investment in trading technology yields the maximum possible return.

Interoperability is another key factor. “A new trading platform should integrate seamlessly with existing systems to avoid operational disruptions,” advises Gabbay. “Ensuring smooth interoperability minimises the risk of data silos and ensures that all parts of your trading ecosystem can communicate effectively. This not only streamlines operations but also enhances data accuracy and decision-making processes.” Platforms that fail to integrate well can lead to significant headaches, requiring additional resources to bridge gaps between systems and potentially leading to costly errors.

Scalability is also essential for any trading platform. As trading volumes increase and new asset classes are added, the platform must scale efficiently to handle these changes. Scalability includes the ability to automate processes and manage higher trading volumes without performance degradation. “A scalable platform supports business growth by ensuring that system performance remains robust even as demands increase,” says Gabbay. “This scalability is not just about handling volume but also about expanding capabilities and accommodating new functionalities as trading strategies evolve.”

Flexibility around customisation is also important, according to Gabbay. “The platform should be capable of swiftly adapting to evolving workflows without causing bottlenecks,” he says. “Your technology shouldn’t become an obstacle, but a facilitator of change. Customisable platforms ensure that you can tailor the tools to meet specific trading needs.”

Key success factors

It’s clear that the dynamic nature of the buy-side presents both challenges and opportunities for sell-side firms. To stay competitive, banks and brokers need to consider a technology strategy that balances their internal needs with the ever-evolving demands of their clients. Whether choosing off-the-shelf platforms, bespoke solutions, or a hybrid approach, sell-side firms might want to prioritise agility, integration, and scalability in their technology stack.

Additionally, the strategic use of AI and ML can significantly enhance trading efficiency and decision-making processes. By embracing these advanced technologies and maintaining a flexible, client-centric approach, sell-side firms can not only meet the complex requirements of today’s market but also position themselves for sustained success in the future.

Robust support and training, seamless interoperability, and the ability to scale and customise are also critical factors that will determine the sell-side’s ability to capitalise on market opportunities and deliver superior value to their clients.

The post Evolving with the Market: Technology Strategies for Modern Sell Side Firms appeared first on A-Team.

The launch of EWIN represents a significant technological advancement for the exchange group. Developed in collaboration with McKay Brothers, the independent microwave network provider, and leveraging the faster transmission speeds of microwave technology, EWIN offers a direct and highly efficient communication pathway, reducing the time required to send orders from London Equinix LD4 to Euronext’s Optiq matching engine in Bergamo IT3 to under four milliseconds, around half the latency of existing fibre links. EWIN is also designed to ensure seamless and efficient order handling, offering 100% resilience, thanks to its full fibre back-up.

Major financial firms Goldman Sachs and Morgan Stanley have already adopted the new technology.

“After establishing our new IT3 data centre in Bergamo, near Milan, we realised from a few large tier-one brokers that they were interested in exploring the performance benefits of microwave technologies,” explains Nicolas Rivard, Global Head of Cash Equity and Data Services at Euronext, in conversation with TradingTech Insight. “Although microwave networks have been around for some time and are relatively established for certain participants, it is a costly and complex technology with a high barrier to entry. Typically, you cannot buy a small amount of bandwidth, which makes the solution expensive. Additionally, there is a technical aspect because you need to develop IT capabilities to route your orders through the microwave. By default, if you buy bandwidth from a microwave provider, it’s not plug-and-play; you need to develop your protocol into the technology.”

Euronext has worked closely with McKay Brothers to address these challenges, says Rivard. “To lower the barrier to entry in terms of cost, we have purchased a bulk of bandwidth and are offering it to clients in slices, starting from 1 Mbps upwards. This means that clients can try it for six months at 1 Mbps for example, and then scale up as needed, rather than committing to a costly solution from the outset. And to address the technical complexities, the solution we’ve developed together with McKay Brothers allows clients to use the microwave link as if it were any other standard connectivity, making it very plug-and-play.”

The microwave route, provided by McKay Brothers, has been operational for two years, since Euronext went live on IT3 in Bergamo in June 2022. But this is the first time McKay’s technology has been used to underpin an exchange’s own solution.

“The development and design of this service has been quite new compared to our usual offerings,” says Stéphane Tyc, Co-Founder of McKay Brothers. “Typically, when a client purchases microwave bandwidth, they need to undertake significant internal development to integrate with the network. However, Euronext’s end clients don’t need to perform any additional integration work; they simply need to set up logical access to Euronext’s matching engine, a process they are already familiar with. And then they can benefit from a fast network that competes with the microwave products used by market makers. The important thing here is that firms who want to use this link can now just go direct to the exchange to access it, without having to put in place dedicated technology.”

Given that microwave networks are susceptible to weather and other atmospheric conditions, how does Euronext ensure resiliency? “We have two routes, one microwave and one fibre, and they work seamlessly together,” says Rivard. “We have ensured, with McKay and our internal IT team, that every order gets sent twice, once via microwave and once via fibre. The first order that reaches the IT3 datacentre is processed, and the other is blocked by the system. This guarantees 100% redundancy, increasing the overall availability of the service.”

The link is now operational, with Morgan Stanley and Goldman Sachs having gone live on day one, 10th July. “The technology has delivered on its promise so far, with latency below four milliseconds and very stable performance,” says Rivard. “Clients are currently only sending specific order types via EWIN to improve certain latency sensitive execution strategies, such as IOC (immediate or cancel) and other aggressive orders. The number of packets going through the microwave is what we expected. And of course, this is just the beginning.”

Both Euronext and McKay Brothers talk of this new service as a way of further democratising the market, bridging the gap between prop trading firms/market makers and banks/brokers. So will it be rolled out to other European centres?

“First, we need to make sure it works from London, to prove that it has an impact and is beneficial for our clients. That will take a few months to confirm,” says Rivard. “But we already have clients interested in having the same service from other locations and asset classes in Europe.”

The post Euronext Launches EWIN Microwave Link Between London & Bergamo, Halving Order Transmission Latency appeared first on A-Team.

By integrating Boltzbit’s AI technology, Liquidnet can now offer members and partner syndicate banks faster access to trading and data distribution, processing and displaying bond deals at a rate significantly faster than its previous parsing technology. This ensures that bonds are quickly available through the company’s deal announcement dashboard and new issue order book.

“This partnership improves the speed at which we can process messages, create, and then send structured data directly to our clients, which in turn allows them to quickly populate their OMS and prepare for trading,” says Mark Russell, Head of Fixed Income Strategy at Liquidnet, in conversation with TradingTech Insight. “The quicker we can do this, the better it is for those clients. Beyond this, the clients of our new issue Trading Platform (grey market) benefit as we are able to launch the new bonds on the screen earlier, giving those clients earlier access and more time to trade.  More trading time on our visible trading platform means more transparent data points, which is very useful for the syndicates and issuers as they get a view as to what is going on in the market.

“Structuring the bond data is not done in a single step, during the bond creation process we need to interpret the market chat, back and forth messaging, that drives the final structure of the bond,” explains Russell. “Our system needs to be able to capture and update any changes to the meta-data, such as coupons, issuers, benchmark, maturity etc. that describe the bond and feed those changes into the trading platform and other information platforms.”

He continues: “We’ve automated this process extensively with our partners at Boltzbit, creating a tool that handles the heavy lifting of structuring this data into a comprehensible bond format. Our partnership with Boltzbit is focused on speeding up and enhancing accuracy, bypassing traditional parsing tools and leveraging artificial intelligence instead.”

Boltzbit’s GenAI technology utilises the data captured from messages exchanged across various mechanisms and channels to create a large language model (LLM) that transforms the information into a structured and usable format.

“This process might seem simple, but it was actually extremely challenging,” explains Dr Yichuan Zhang, CEO and co-founder at Boltzbit. “Firstly, it involves very complex business processes. It’s not just about parsing one email; understanding the context of the conversations and the associated business processes is essential. Secondly, this is a highly specific solution, requiring the model to be extremely accurate and to follow the precise logic of the business flow around new issues. Finally, the solution needed to be highly secure and deployed in a way that allowed Liquidnet full control.”

Since the launch of its primary markets offering in 2022, Liquidnet has achieved record trading volumes in its new issue order book and increased participation from over 35 European syndicate banks, highlighting the company’s commitment to modernising primary markets and delivering substantial value to clients and the industry.

In addition to partnering with Boltzbit, Liquidnet has previously collaborated with NowCM and BondAuction, reinforcing its dedication to fostering efficiencies and connectivity for investors, banks, and issuers through strategic partnerships.

The post Liquidnet and Boltzbit Collaborate, Utilising GenAI to Accelerate Bond Primary Markets Workflow by 90% appeared first on A-Team.

The facilities are aimed at helping firms address the post-trade implications of a Securities and Exchange Commission (SEC) July 2023 rulemaking that mandated central clearing for a wide range of U.S. Treasury (UST) securities transactions including cash, repurchase agreements (repos) and reverse repos.

The UST market sees daily transactions averaging over $700 billion in cash and $4.5 trillion in financing, making it vital for U.S. government funding, monetary policy, and as a safe haven for global investors. The market has grown rapidly and disproportionately where currently, 87% of this trading activity is cleared bilaterally.

Several liquidity events over the past decade highlighted vulnerabilities in the treasury market where the systemic risk of a non-participant failing required mitigating. The SEC’s final rule, adopted in December 2023, aims to expand central clearing to mitigate such counterparty and systemic risks.

The new rule seeks to transition a substantial portion of the daily US $4.9 trillion treasury market activity to central clearing through a central counterparty (CCP). Currently, the only authorised CCP for the UST market is FICC. However, other CCPs have expressed interest, among them London Clearing House (LCH).

Tools of the Trade

The first of the new FICC tools, a Capped Contingency Liquidity Facility (CCLF) Calculator, is designed to increase the transparency into the financial obligations associated with membership in the FICC Government Securities Division (GSD).

The CCLF is a critical risk management facility designed to provide FICC with additional liquidity resources to meet cash settlement obligations in the event of a default by the largest netting members (see DTCC Risk Management Tools). By allowing firms to estimate their potential CCLF obligations, the calculator aids in better liquidity planning and risk management. This can make FICC membership more attractive and manageable for a broader range of market participants, including smaller institutions and buy-side firms.

The calculator helps firms anticipate and plan for the liquidity commitments required under the new SEC clearing mandates. By providing upfront attestations regarding their ability to meet CCLF obligations, firms can ensure they are prepared to comply with the expanded central clearing requirements for U.S. Treasury securities.

Tim Hulse, Managing Director of Financial Risk & Governance at DTCC, emphasized that VaR is a key risk management concept and a primary component of GSD’s Clearing Fund requirements. The calculator uses historical data, volatility, and confidence levels to estimate VaR, thus enhancing market transparency. It allows market participants to calculate potential margin obligations for given positions and market values using FICC’s VaR methodology.

Hulse highlighted the urgency of evaluating firms’ risk exposure with the expansion of U.S. Treasury Clearing, noting that the VaR calculator offers increased transparency into these obligations.

These tools are public and not restricted to member firms This means that as firms consider their optimal approach to access central clearing for compliance with the the new clearing rules, these risk tools can provide the necessary transparency and support as firms evaluate the different types of membership and models with GSD.

The SEC has introduced several measures to make FICC access more inclusive. FICC offers multiple membership models, including Netting Membership, Agented Clearing, Sponsored Membership, and Centrally Cleared Institutional Triparty (CCIT) Membership, catering to a wide range of market participants from large banks to hedge funds. The SEC has provided temporary regulatory relief to address custody and diversification concerns for registered funds.

CCIT membership primarily benefits institutional cash lenders such as corporations, asset managers, insurance companies, sovereign wealth funds, pension funds, municipalities, and State treasuries. It allows these entities to engage in tri-party repo transactions with enhanced risk management and operational efficiency provided by FICC. The central clearing of these transactions helps reduce counterparty risk, ensure the completion of trades, and potentially offer balance sheet netting and capital relief for participants.

The Securities Industry and Financial Markets Association (SIFMA) is actively coordinating multiple work streams that involve both buy-side and sell-side members. These efforts aim to accelerate the necessary transitions for the clearing mandates. Key aspects include engaging with the SEC and other regulatory agencies to address market access issues, particularly for registered funds and margin transfers, which are crucial for ensuring a smooth transition to central clearing.

Developing an operations timeline with key milestones is another critical task. This timeline will guide the transition to full central clearing by June 2026 for repos. Addressing issues related to market plumbing and connectivity is also vital to support the increase from 13% to 100% clearing. This involves ensuring that all participants can effectively connect to and use the central clearing infrastructure.

Regular communication with market participants is planned to keep them informed about progress and strategies for meeting the clearing deadlines. This will include updates on the status of various strategies and the overall progress towards the deadlines. SIFMA will also engage in regular discussions with the SEC and other agencies to ensure they are aware of the progress and any potential needs for timeline adjustments or phased rollouts.

Legal and enforceability issues will be addressed by obtaining netting enforceability opinions in relevant jurisdictions to support large-scale clearing. This step is closely tied to the development of market standard documentation. Additionally, new documentation approaches that leverage modern communication methods will be evaluated to increase efficiency.

Stakeholder engagement is essential to confirm the status of various strategies and ensure alignment with the clearing deadlines. SIFMA plans to reach out to market participants regularly to keep them informed and engaged. This will help ensure that all participants are on track to meet the clearing mandates.

Lastly, future planning includes preparing for additional publications and podcasts to keep the membership and broader public informed about ongoing efforts around Treasury clearing. This will ensure that everyone remains updated on the progress and any developments related to the central clearing mandate.

The post DTCC FICC Releases Tools to Help Firms Address Incoming SEC Central Clearing Mandate appeared first on A-Team.

QUODD’s QX Digital Platform gives customers access to market data functionality and content for front, middle and back-office workflows. S&P Global Market Intelligence now supplies the Platform with independent pricing and liquidity data for bonds, offering advanced security look-up and query capabilities using pre-defined or custom templates. Transaction data analysed and aggregated to generate pricing content encompasses nearly three million corporate and sovereign bonds, municipal bonds, and securitised products.

Integrating S&P Global Market Intelligence’s bond pricing and reference data with global equities and funds through QUODD is designed to enhance the QX Digital Platform’s display capabilities and connectivity for downstream wealth management users. The integration allows users to optimise their market data consumption, maximise their market data spend, reduce costs without compromising quality, and improve workflow efficiency. It supports daily pricing, reference data, and corporate actions while automating data usage entitlements for customised workflows.

“We have incorporated access to S&P pricing and reference data into our extensive content catalogue, which is a mix of proprietary and third-party data sets,” Bob Ward, CEO of QUODD, explains to TradingTech Insight. “This collectively amounts to 150 data sources and 250 billion data points in our data lake. We have made all this data available via several access points. Users can access this data as individual datasets via several communication methods (QX Marketplace), they can access digitally online and view and extract on demand (QX Digital), and now they can programmatically access multi-asset class data into third-party applications (QX Automate).”

QUODD has now signed numerous clients across multiple market segments with similar workflow concerns. The key drivers are timeliness, simplicity, and easy accessibility, as Ward outlines in the following use cases:

New issues research – New debt instruments are released into the market daily, and firms need pertinent terms and conditions to classify them correctly in their systems. The QX Digital Platform is tied into the real-time S&P bond reference data API to retrieve those details as soon as S&P does.

New asset setup – Banks price assets based on the issues that their clients hold. “A current customer told us this week that they set up 850 new assets in their system in June alone,” says Ward. “They are constantly accessing QX Automate to pull the data they need to properly set up those securities in their system based on asset type, sometimes multiple times a day. This gives them the timing and flexibility to retrieve data at any time to meet their client’s pricing needs.”

Price challenges – The Price Challenge process via the QX Digital Platform is supported by the integrated S&P Price Viewer tool, as Ward explains: “This tool gives our customers direct access to the S&P bond evaluators for price challenges. As bond pricing varies by provider, prices can differ, and customers need to confirm the most accurate evaluation. Price challenges are affirmed or updated usually within a few hours. The S&P pricing methodologies are transparent to all of our customers.”

Security master maintenance – “Most of our customers use QX not only for pricing but for global security master maintenance using our Corporate Actions solutions,” says Ward. “Many parameters can be set, such as Voluntary vs. Mandatory Date parameters, based on Effective Date or Announcement Date, or the ability to hone in on specific events that affect things like reorganizations, which affect shares and price. Maintenance tasks like identifier changes, name changes, M&A, etc., are all important in maintaining a security master.”

In addition, the platform has embedded proprietary calculators such as an Accrual & Amortization tool that provides the requisite buy & sell tickets on certain fixed income instruments, leveraging content from S&P to meet and exceed the functionality available in the legacy terminals.

Modern technologies and delivery models have been integrated into the QX Digital Platform to meet the new need for data on demand, and these innovations keep QUODD ahead of its competitors, says Ward. “Most providers today have layers and silos of technology, leading to increased inefficiencies and lower quality. QUODD is designed from the ground up for the future, and with our cloud-native platform, we can deliver our content into customisable client workflows that are turnkey, scalable, and cost-effective. Building from this platform allows us to meet customer needs today with very low switching costs while opening new options for even more advanced integrations as their digital strategy continues to evolve.”

Ward states that the two defining characteristics of the technology are a cloud-native platform that is purpose-built to power the full breadth of market data apps and APIs and the ability for companies to manage their preferred consumption model and frequency of data updates. “By virtue of technology reducing the friction of integrating and onboarding new sources of data on a self-service, on-demand, and connected basis, the QX Automate module delivers a superior experience, enabling customisation and integration at the same time; and because we are cloud-native with a modern tech stack, we can build faster and respond to customer requirements with more agility and transparency,” he says.

In terms of market data spend, Ward points out that under QUODD’s pricing model, clients only get charged for what they use and the frequency of that use. “This pricing approach, combined with a single integration point for a client’s entire security master, coupled with the improved workflow for the employees (no more swivel chairing), provides a very good value for our clients,” he says.

Looking ahead, QUODD has a number of customer-driven projects in the pipeline, including leveraging AI to help build third-party adapters at a quicker pace, and using AI to expand the company’s proprietary data sets.

The post QUODD Enhances QX Digital Platform with S&P Global Bond Data Integration appeared first on A-Team.

Earlier this year, OSTTRA partnered with Baton Systems to launch a new FX PvP (Payment vs Payment) settlement service, aimed at mitigating bilateral settlement risk in FX markets. This initiative is part of OSTTRA’s broader strategy to enhance the market structure of OTC markets and reduce counterparty exposures.

TradingTech Insight sat down recently with Joanna Davies, Head of Trade Processing, and Steven French, Head of FX and Securities Product Strategy, to discuss how this and other OSTTRA initiatives are addressing some of today’s most pressing post-trade challenges.

TTI: Jo, what are some of the key trends and challenges you are seeing in the post-trade space, particularly with the transition to T+1 settlement?

JD: The realm of post-trade activities is no longer confined to the back office but is increasingly impacting front-office operations. This shift is evident in the transition to T+1 settlement, which has underscored the critical importance of efficient post-trade processes. Traditionally, areas such as liquidity management, credit risk, and liquidity provision were handled separately from post-trade operations. However, with the advent of automation in these domains, there is a growing convergence. The T+1 settlement initiative has illustrated the necessity for robust infrastructure and comprehensive risk management strategies. While there are differing views on the industry’s preparedness—whether it was a result of meticulous planning or the inherent flexibility of existing systems—the transition has undeniably focused attention on post-trade processes. Significant efforts have been dedicated to preparation, especially in managing settlement risk and liquidity provision. The integration of these functions into the front office highlights the evolving landscape where post-trade efficiency is paramount to overall financial operations.

TTI: Steve, where are the main areas of settlement risk, and how is OSTTRA helping the industry mitigate these risks?

SF: The significant daily risk of FX settlement outside of Continuous Linked Settlement (CLS) is a pressing concern, given the estimated daily exposure of $2.3 trillion settled outside the utility today. This substantial risk is particularly pronounced for emerging market currencies, which struggle due to the absence of a suitable settlement platform. The infrastructure and legal complexities required to establish such a platform are substantial, creating barriers to adoption.

Addressing this issue, OSTTRA, in collaboration with Baton Systems, has developed an innovative PvP (Payment vs Payment) settlement orchestration platform specifically targeting non-CLS currencies. The initial focus is on the Chinese yuan (CNH), with major banks such as HSBC and Wells Fargo already onboard. This platform aims to mitigate settlement risk by providing a structured and reliable solution for managing PvP settlement of these currencies, paving the way for broader participation and increased security in the settlement process. By targeting these high-risk areas first, OSTTRA and Baton Systems are setting the foundation for a more secure and efficient global settlement infrastructure.

TTI: What kind of appetite is there for such a new settlement infrastructure?

SF: There is a strong industry interest in reducing settlement risk, demonstrated by the active participation of multiple banks in discussions aimed at expanding the new settlement platform. Recently, we convened a working group and are open to adding any other participants eager to collaborate on this initiative to join. The discussions to date have moved beyond the feasibility of the platform and are now focused on practical steps for implementation, such as how to onboard and make the system work effectively.

Achieving critical mass is seen as essential, with the participation of a few additional major banks likely to drive broader adoption across the industry. Currently, HSBC and Wells Fargo are already on the platform, and the inclusion of just two or three more major players could significantly move the needle.

The primary hurdles to adoption are not technical but involve changes in treasury operations, particularly concerning the management and agreement of nostro accounts. Overcoming these operational challenges is key to leveraging the already established network and technological infrastructure, thereby facilitating a smoother and quicker transition to the new system.

TTI: Can you both provide more details on your technology initiatives, particularly the integration between OSTTRA and Baton Systems?

SF: Essentially we’re leveraging OSTTRA’s robust matching engine in conjunction with Baton’s advanced shared ledger technology, to ensure secure and efficient settlement processes, which are critical. The matching engine, which has been thoroughly tested and widely adopted, is now connected to Baton’s next-generation shared ledger, which provides atomic settlement -. This means that PvP transactions will only be executed once both parties have agreed, thus ensuring transaction finality.

JD: We are also developing advanced tools designed to identify and resolve trade breaks proactively. Recognising the inefficiencies of current processes, where the resolution of trade discrepancies often involves manual communication and guesswork, we’re leveraging artificial intelligence (AI) and historical data analysis to predict and manage trade failures. By integrating enhanced monitoring and exception management, this adds crucial context to trade data, allowing for a more accurate diagnosis of where and why a trade might fail. This innovative approach provides an understanding of the specific conditions leading to trade disruptions. By analysing past trading volumes and incorporating real-time feeds, OSTTRA can forecast spikes in trading activity and pre-emptively address potential issues. This proactive and context-rich method marks a significant advancement in post-trade processes, reducing settlement risk and operational inefficiencies, and ultimately providing a more reliable and transparent trading environment.

We are also enhancing the synergy between pre-trade and post-trade services by expanding the asset classes supported by our sophisticated pre-trade limit checking service initially designed for interest rate swaps and credit default swaps. This service ensures low-latency risk checks are performed before orders are sent to the market, helping to address a client’s regulatory requirements and minimising potential risks. Developed in response to the CFTC Dodd-Frank requirements and EU regulations for MTFs, this unique solution has been operational for over a decade, continuously evolving to support additional asset classes such as FX. By integrating pre-trade and post-trade services, OSTTRA aims to provide a comprehensive end-to-end solution that significantly enhances transparency and operational efficiency. This integration allows for seamless monitoring and management of trades throughout their lifecycle, from order initiation to settlement, ensuring a high level of accuracy and reducing the risk of trade failures.

TTI: Looking ahead, what role might distributed ledger technology (DLT) and decentralised finance (DeFi) play in the future of post-trade?

JD:  We continue to maintain a watchful eye on the developments in DLT, blockchain and DeFi, recognising their potential while remaining cautious about adopting these technologies until they are fully production-ready. In contrast to many industry peers who have proposed various blockchain use cases that are not yet ready for real-world application, OSTTRA has identified a practical and viable use case for blockchain in change of ownership scenarios. This particular use case is advantageous as it circumvents the common issues of latency and throughput, providing a more efficient solution.

By utilising an extensible architecture, OSTTRA is prepared to leverage blockchain technology in a manner that is both practical and forward-thinking. This approach not only addresses current operational challenges but also positions the company to explore and integrate other asset classes in the future. As blockchain and DeFi technologies continue to evolve, we remain committed to evaluating and implementing these innovations in a measured and strategic manner, ensuring they meet the rigorous demands of production environments.

TTI: Thank you both.

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In addition to news content, LSEG will equip Dow Jones’s editorial teams with LSEG Workspace, incorporating the latest in workflow and productivity tools to support a data-driven newsroom environment. Journalists will benefit from comprehensive LSEG data sets, including Datastream, Fundamentals & Estimates, StarMine models, and SDC Platinum’s premier deal insights.

The Wall Street Journal’s coverage of mergers and acquisitions (M&A) and capital markets will be bolstered by over four decades of data, insights, and league tables provided by LSEG. Moreover, LSEG will serve as a key source of deals data, featuring prominently in the WSJ Investment Banking Scorecard.

The partnership will also see the co-development of an enhanced news experience within LSEG Workspace, curated by senior Dow Jones editors. This tailored news service, designed for the Workspace audience, is slated for launch in early 2025, with LSEG being Dow Jones’s first partner in this new enterprise-focused subscription model.

Combining Dow Jones’s real-time, industry-leading news with LSEG’s advanced classification, tagging, and search technologies, the collaboration aims to enrich news feed offerings for LSEG subscribers, who will gain access to Dow Jones’s text feeds, which LSEG will use to enhance its real-time news, news archive, and news analytics services.

David Schwimmer, CEO, LSEG, commented: “The inclusion of the latest news, commentary and analysis from Dow Jones and The Wall Street Journal is a powerful new addition for our LSEG Workspace users. Our partnership will also see Dow Jones benefit from our world class data and analytics capabilities to support a data-driven newsroom across all of its channels.”

Almar Latour, CEO of Dow Jones and Publisher of The Wall Street Journal, added: “This partnership with LSEG is key to delivering the world’s best news, information and analysis to business leaders across the globe. Combining the strength of both brands will serve the needs of LSEG Workspace users and enhance our newsrooms.”

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SIX, a global data aggregator and operator of exchanges in its native Switzerland, as well as in Spain, has released a flurry of new data products since January, including a suite of ESG tools and two global equities index families that herald a plan to become a one-stop-shop for ETFs.

According to Leslie, the frenetic pace of partnerships, product releases and enhancements this year is just the tip of the iceberg. The Zurich-based, bank-owned organisation has more to come, all built around a trove of data and data capabilities it has built up over more than 90 years of operations.

At heart, it remains a global pricing reference data provider – that’s the “base data” that SIX “is built on”, says Leslie. But the company is putting in place ambitious plans to leverage that core data competency to meet the increasingly complex demands and use cases of financial institutions.

“I believe that the fundamental data set – having really good-quality reference data and pricing data – allows us to create new value-added services and insights to our clients, and that remains the same whether we’re talking about GenAI or good old fashioned master reference,” Leslie tells Data Management Insight from SIX’s offices in London. “Unless you’ve got those basics you can’t really make sensible decisions, let alone produce reliable analytics.”

Expansion Plans

Leslie says SIX sees its USP as the ability to leverage that core data product to create applications for a multiplicity of use cases. Already it is using its fundamental datasets as the backbone of regulatory, corporate actions, tax, sanctions and ESG products for its banking clients.

A slew of recent acquisitions, investments and partnerships have been similarly guided by SIX’s programme of creating services that can tap into its core offering. The purchase of ULTUMUS in 2021 and the deepening of a long-standing association with BITA earlier this year were part of a plan to forge the company’s ETF-servicing business, each deal enhancing SIX’s indexing capabilities.

In ESG too, it has been aggressively striking deals to help burnish a slate of new sustainability offerings. Products unveiled in the past year by ESG product strategy and management head Martina MacPherson all benefit from supply deals struck with vendors including Sustainalytics, MSCI, Inrate and the CDP, as well as new partnerships with companies including Greenomy. Among the ESG products launched recently is an SME assessment tool, which MacPherson said will bring thousands of smaller companies into the ESG data ecosystem, into which banks and investors might otherwise have had no visibility.

Working Data

SIX’s ESG provisions illustrate what Leslie describes as the company’s dedication to making data work for companies.

“Organisations need to figure out how they’re going to incorporate data and how they’re going to make it relevant,” she says. “Well, the only way you can make it relevant is if it’s got something to hook on to, and that’s where you get back to those fundamental data sets.”

Leslie explains that one of the driving forces behind the company’s vigorous expansion plans is the changing demands for data among banks. No longer can any part of the industry rely on end-of-day pricing data, or monthly and quarterly reports. Ditto for risk managers and compliance teams.

The consequence has been a shift in the workloads of the front-, middle- and back-offices. No longer is research the premise of middle-office teams, Leslie offers as an example; the front office needs those insights quicker and so it has made sense for banks to embed data access and functionality within asset managers own analytical workflows.

“Asset managers see that the speed of data is increasing all the time and so the buy side, which was perhaps in the past much more built around end-of-day or less immediate requirements, is moving much more into real-time and intraday needs,” she says. “That requires, therefore, real-time market data, and that is expected by regulators, it’s expected by customers, and its therefore expected by market participants.”

AI Challenge

Jokingly, Leslie likens data operations to raising a child: it needs constant attention and feeding to grow and thrive. The simile is just as true for banks’ data management needs too; they are constantly changing and growing, influenced by internal needs and external innovations. That’s exemplified by the race to integrate artificial intelligence (AI) into processes and workflows.

Recent SIX research found that more than nine out of 10 asset managers expect to be using AI within the next three years and that half already do. Driven by its own clients’ need to understand what AI will mean to them, SIX has begun looking at how it can enhance its products with the various forms of AI available.

It has taken a structured approach to the programme and is looking at where AI can help clients improve efficiency and productivity; examining how it can improve customer experience and support; and, testing how it can be incorporated into products. For the latter, SIX is experimenting with off-the-shelf GenAI technology to identify aberrations in trading patterns within a market abuse solution.

On this subject, too, Leslie stresses that SIX can only think about such an evolution because it is confident that it has a solid foundational data offering.

“Our role is to make sure that we’re providing data that is fit for purpose and enables our clients to do business in a competitive way,” she says. “So that will include, as it always has, providing trusted, reliable data that the client knows is fit for purpose and on which they can make decisions. And that’s as true if it’s going to an AI model as if it’s going into a client digital wealth platform or portfolio reporting or risk solution.”

Values Align

Leslie took up her latest role at SIX in 2020 and also is a member of the board for the SIX-owned Grupo BME, Spain’s stock exchange, previously holding roles at LSEG and Thomson Reuters.

She is proud to be part of an organisation whose stakeholders are banks – about 120 of them – and not shareholders “trying to race to hit a quarter result”. She feels a very strong alignment with its values, too.

“It’s an organisation whose purpose is to enable the smooth functioning of the economy and has consistency and trust at the very core,” she says. “When half the world is voting this year, this stuff’s important, and when we’re talking about AI, or we’re talking about market failures then the thing that brings trust and progress is the data that sits behind it. To be a trusted provider in this day-and-age is a critical service.”

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Options Technology supports trading at numerous venues worldwide with its managed infrastructure and connectivity services, along with private financial cloud services that combine hosting with direct market access, total cost of ownership reduction, and top-tier resiliency and security.

“One of the aims with this collaboration is to enable customers to utilise the Options Atlas feed more efficiently, says Grethe Brown, CEO of DiffusionData, in conversation with TradingTech Insight. “Our approach allows us to handle data transformation and distribution, significantly reducing egress costs by delivering only the specific data the trader needs. Unlike the standard practice of sending all data, we provide a sophisticated distribution that transmits only the delta—the difference between successive data points—resulting in greater efficiency and cost savings. Also, from a DiffusionData perspective, our team will benefit from collaborating with a larger entity like Options. This partnership will enhance our capabilities, providing a more comprehensive solution with Options’ consolidated data service than we currently offer.”

The Diffusion framework offers control over end-to-end data flow, creation of personalised data streams, and efficient data delivery through patented bandwidth optimisation, which will enable clients to fully leverage Options’ consolidated data service.

“There are numerous applications for personalised data streams. For instance, in FX liquidity provision, a bank might quote different FX rates to different tiers of customers,” says Brown. “Additionally, they may choose to apply a delay to some of their data, allowing them to charge lower fees to customers who receive the data with a 15-minute delay.”

Danny Moore, President and CEO of Options, commented: “Our partnership with DiffusionData represents a significant advancement in our ability to deliver robust and scalable data solutions to our clients. By integrating Diffusion’s cutting-edge data streaming technology with our consolidated data service, we are not only enhancing data delivery but also empowering our clients to gain real-time insights and make informed decisions faster and more efficiently. This collaboration underscores our commitment to providing innovative and reliable infrastructure that meets the evolving needs of the capital markets.”

Grethe Brown, CEO of DiffusionData, commented on the partnership: “By integrating our Diffusion framework with Options’ consolidated data service, we are providing clients with a powerful solution that combines real-time data streaming with unparalleled control and efficiency. This collaboration will enable users to harness the full potential of their data, delivering seamless and personalised data streams that drive better decision-making and operational performance. Together, we are setting a new standard for data delivery in the financial services industry.”

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“It’s crucial for people to understand what we’re measuring, as context is important with such low numbers,” Olivier Cousin, Director of FGPA Solutions at Exegy, tells TradingTech Insight. “The STAC T0 report measures the latency of a system ingesting UDP and sending TCP frames. This covers the typical market data tick-to-order flow. The main value of this report lies in what is called ‘actionable latency,’ or reaction time. When a UDP frame contains a specific field, such as a price, which triggers an action, the clock starts only when that specific field (i.e. a price) enters the FPGA, not at the beginning of the UDP frame. We measure the time from this point until the TCP order exits the FPGA. With this benchmark, we are showcasing that the latency induced by the handling of 10Gbs Ethernet went from 24.2ns to 13.9ns with the new AMD card, which includes hardened MAC/PCS.”

Exegy claims to be the only capital markets technology provider offering a comprehensive FPGA development framework specifically tailored for ultra-low latency financial applications. Exegy’s nxFramework standardises the development of FPGA-based trading platforms, allowing developers to focus on optimising their core business logic. Exegy’s offering includes reference designs, expertise, and support, facilitating a faster time-to-production for firms developing ultra-low latency trading systems.

The production-proven FPGA development framework provides clients with reference designs to manage a wide range of applications, including pre-trade risk check gateways and tick-to-trade electronic trading platforms. The collaboration with AMD combines innovative hardware with production-tested applications, delivering groundbreaking performance through an off-the-shelf solution that ensures the lowest possible latency.

“There are two main innovations that contribute to this achievement,” says Cousin. “Typically, within an FPGA, there are resources that handle the 10 Gig connectivity. AMD’s innovation is their AMD Alveo UL3524 accelerator card, which involves hard-wiring the logic that deals with the 10 Gig protocol into the ASIC, rather the FPGA, which still has to manage all the network layers above Ethernet. This innovation is a contributing factor to the 49% latency reduction.”

He continues: “Exegy’s innovation lies in creating a UDP stack, TCP stack, and logic that processes the data and sends orders, all with zero latency in the FPGA. There are no clock cycles used for this critical path, achieving the absolute minimum latency as the FPGA processes the data in less than a clock cycle. Our nxFramework includes a full UDP stack for examining UDP traffic and a full TCP stack that supports the complete TCP protocol. For instance, if the exchange requests a TCP fragment to be resent, the TCP stack will resend it. The system is entirely self-contained and operates exclusively in hardware.”

The significant reduction in tick-to-trade execution latency underscores the success of Exegy’s partnership with AMD, which began last year, and demonstrates the company’s ongoing commitment to minimising latency. The collaboration leverages hardware acceleration, FPGA flexibility, and low-latency networking to ensure high performance and determinism. The Exegy team achieved precise testing measurements, reducing jitter to 200 picoseconds—up to 10 times lower than previous benchmarks—thus ensuring the accuracy of the STAC-T0 results. Existing Exegy customers, as part of their subscription, received updates to the IP cores that enabled this latency record.

“The value we demonstrate with this report is that the nxFramework highlights the lowest achievable latency with the FPGA technology currently available in the industry, and we assist our customers in attaining this performance,” says Cousin. “With the addition of support for this AMD card, customers can migrate their code with minimal development time. Customers using our nxFramework solution can purchase this card and migrate their design to systematically achieve the lowest possible latency.”

STAC benchmarks are the industry standard for evaluating solutions that enable high-speed analytics on time-series tick data. The STAC-T0 benchmark, which uses industry-standard hardware, making it fully transparent and reproducible, specifically assesses tick-to-trade network-I/O latency. The previous lowest benchmark speed of 24.2 nanoseconds was also achieved using AMD accelerators.

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