Based in London, Paul Taylor is SWIFT’s Director of Global Matching and leads the post-trade strategy for the global financial message network. On a visit to New York last week, he met with Traders Magazine’s sister publication Securities Technology Monitor contributing editor Elliot Kass to share some thoughts about the trend toward post-trade automation.
Securities Technology Monitor: Interest in post-trade automation appears to be growing across the industry. What’s driving this?
Taylor: When you look at what’s happened to the industry since the crisis, return on equity is significantly down. So the industry is looking at how to increase its cost and efficiencies, as opposed to simply growing revenue as it did before. That’s one driver.
The other driver is new regulations. Automation that facilitates matching and reconciliation will greatly simplify reporting and is being driven by regulators. It will pay dividends across the market.
Securities Technology Monitor: What services is SWIFT offering in the post-trade space?
Taylor: We have two major offerings. The first is Global Electronic Trade Confirmation, or GETC. This service can be used for matching cash equity trades. The major benefit to clients is that GETC confirms trades early in the cycle, and in that way greatly reduces the possibility of a failure later in the cycle. GETC provides a standardized process for matching fixed income and equities trades for both buy and sell-side firms. The post-trade world still relies on a large amount of manual processing, and GETC let’s participants reuse their existing SWIFT infrastructure to automate confirmation matching. GETC minimizes operational risk, increases straight-through processing and reduces post-trade processing costs.
Our other major offering is Accord. This is a multi-asset matching service-essentially, a fail-safe matching and exception handling solution for foreign exchange, money market, OTC derivative and commodity trade confirmations. It’s provided under the software-as-a-service model, which makes it very simple for clients to adopt, since they don’t have to invest in any new infrastructure.
Securities Technology Monitor: Are there any new offerings within this mix?
Taylor: Affirmations is another matching service that’s relatively new. The beauty of Affirmations is that you don’t have to be an Accord user to confirm a trade. So with a simple SWIFT connection, non-SWIFT clients can use this service to conform to new regulations, like Dodd Frank in the U.S. and EMIR in EMEA, which loosely speaking is the European version of Dodd Frank.
There’s also our new cloud-based service, Alliance Lite 2. SWIFT is aimed at very large, high-volume institutions. Lite 2 is a cloud-based solution that works off of a token, which lowers the barrier to access. It has a very low cost and a very low technical footprint that’s geared toward institutions with a lower message volume.
Securities Technology Monitor: You’re over here in the States to meet with potential new clients for these services. How have those conversations been going? Do you have a lot of competition in this space? What are the sticking points for your prospects before they sign up?
Taylor: Many clients are interested in multi-asset cross matching, so we’re seeing some good traction. We’re certainly not a monopoly in this space, so yes we have competition. Our advantage is that we’re a utility, so we can offer certain efficiencies and cost-benefits across the board.
For clients it comes down to the business case for using post-trade services. It often comes down to whether the institution has the budget to bring a new system on line. Given that a lot of these products get back to regulation-from an efficiency and cost perspective, the business case is clear. But from a regulation perspective it’s becoming increasing clear as well.
Securities Technology Monitor: How do post-trade services tie in with how SWIFT is moving to expand its market reach?
Taylor: Affirmations and the new Lite 2 Cloud service have users across multiple segments-not just banks. They include corporates, fund manager, custodian agents and investment houses, so they offer us a way to expand our footprint and reach a broader segment of the market-especially many of the smaller players and institutions that weren’t really in our domain before.
