‘Normalizing’ Post-Trade Across Asset Classes
Traiana, a provider of pre- trade risk and automated post-trade processing in listed and over-the-counter trading markets, has expanded beyond its roots in foreign exchange to span the gamut of asset classes, including exchange-traded derivatives, fixed income, CDS and synthetic and cash equity transactions.
“The need for a truly accepted confirmation platform is driven by global players,” Roy Saadon, co-founder and head of EMEA at Traiana, told Markets Media. “The global players want to look at one process across the globe and one process across all assets. They don’t want to do it for fixed income and equities and repos. The idea is to normalize the process.”
The Harmony network for equities and fixed income has experienced a recent 300% growth in the number of participants which, combined with volume growth of over 1000% (July 2013-July 2014) demonstrates the industry need for a new methodology in securities post-trade processing, according to Saadon.
The launch of Harmony Securities builds on Traiana’s Harmony Equity Swaps network, a post-trade bilateral and tri-party matching service for executing brokers, prime brokers and buy-side firms. The give-up network volume on Harmony Equity Swaps is achieving record month-on-month growth, with volumes doubling since July 2013, according to Traiana.
“We started the company with a vision of automating post-trade across assets,” Saadon said. “Our clients can now use one platform for their post-trade trading activity, across asset classes, and across the global markets. Our sell-side participants are servicing EMEA cash equity flow alongside APAC synthetic flow over the same platform.”
According to a white paper published by Alpha Omega Financial Systems, a provider of post-trade technology, the Financial Information eXchange (FIX) Protocol has becomee the de facto messaging standard, and FIX can reduce post-trade costs.
Alpha Omega estimates that post-trade costs for equity transactions globally could drop by 30% or more using a FIX-based solution. For both buy side and sell side trading desks that are under increasing pressure to reduce operational risks while containing costs, FIX-based post-trade presents compelling advantages.
“There’s little competition to reduce risk and create a vibrant post-trade market in the U.S.,” . “The $24 trillion U.S. equity market has a single point of failure in the post-trade funnel and almost no price competition. Beneficial owners and institutions trading in the world’s largest market deserve the benefits of a competitive marketplace.”
“A number of large, global asset managers have identified post-trade as an area where they are looking to improve efficiencies, reduce costs and capture more alpha,” said Ignatius John, president and co-founder of Alpha Omega Financial Systems, in a release. “As with the evolution of trade execution, the efforts of these early adopters is driving the industry’s migration towards FIX for post-trade.”
As large asset managers adopt the FIX 4.4 protocol for their post-trade process, Harmony enables brokers to normalize data and messaging, shielded them from bespoke investment in a client-specific FIX based workflow, while offering the controls of real-time matching to their entire client base.
“A few very dominant participants have really forced the adoption of 4.4 onto the market,” Saadon said. “By delivering same-day trade affirmation and trade matching, Harmony reduces both operational and counterparty risk as well as the risk of settlement failure.”
Harmony normalizes the flow of data for banks, so that when they are dealing with large buy-side institutions that have adopted FX 4.4, so that to the institution it appears that the bank has also adopted, even though behind the scenes they are still using legacy systems.
“Harmony has always been about normalizing,” Saadon said. “Standards are great, but they’re hard to deploy and it’s hard to get anyone to accept them. Our approach in speeding up the buildup of networks was to normalize the data. We wanted people to focus initially on having the right data, and not worry about the format. That allowed us to create a very large client base in a relatively short time because once you normalize you can start doing things like matching, allocating, etc.”
Featured image via Marek/ Dollar Photo Club
2021 marked the fourth consecutive year of record-setting trading activity.
LCH SwapAgent registered over 10,000 trades in 2021, a five fold increase.
There is growing interest in actionable insights into market data.
The next focal point of the crypto market will be over-the-counter derivatives.
Overall trading volumes across all products fell 8% from 2020.