Comyno
Markus Büttner of Comyno discusses recent developments in securities finance and how regulatory challenges can be turned into new opportunities
With the first half of 2015 drawing to a close, what has characterised the marketplace for you in the past six months?
Regulatory changes remained at the forefront of everybody’s mind, just like they have for the past few years. With certain regulations becoming more pressing, this will remain unchanged for the foreseeable future. Despite this, we have observed market participants changing their approach towards complying with new regulations.
Compliance has naturally been the primary concern, but, with a better understanding of the regulatory landscape, market participants have begun to combine regulatory compliance with a repositioning of certain business lines to benefit from opportunities that have presented themselves in the post-regulatory world. Many internal projects launched in the last six to 12 months aim to increase competitiveness while complying with new regulations.
How does Comyno support clients in ensuring future competitiveness?
We are in a position to offer our clients integrated advisory, programme management, business analysis, and software and technology, with a focus on securities finance and the various areas that it is closely connected with, such as trading, treasury and collateral management. Working with buy- and sell-side clients alike, we have a global view on what matters most to a variety of market participants. This allows us to directly align our service offering to the needs of our clients, enabling us to define clear project goals that go well beyond meeting market standards or complying with regulatory requirements.
Last time we heard about Comyno’s new securities lending software solution C-ONE. What is the latest news on this?
A lot has happened since then. Software and technology have become important parts of our overall service offering. We can proudly announce that we have successfully implemented our software solutions such as the C-ONE X-Repo Hub with an increasing number of clients.
We have forged strong relationships with our existing client base allowing us to further develop our range of software offerings. C-ONE is evolving into the realms of collateral and inventory optimisation as we are closely working with a client to implement an optimisation tool based on our C-ONE framework.
We are excited about the challenging future ahead of collateral management and trading and the new dimension this brings to our C-ONE software platform.
What are the most important requirements that the market is currently looking for in a software solution and how does Comyno meet these demands?
We believe that technology solutions, now more than ever, need to encompass not only data collection but also: analysis and reporting; help to automate tasks for increased efficiency; be flexible and scalable; and be able to easily integrate with the legacy systems in an existing software environment.
All of our software solutions have been specifically designed to satisfy these requirements. For instance, C-ONE’s data model allows for consolidated views of positions, trades and associated collateral. We offer a variety of import and export adapters such as XML and CSV, as well as direct database connections. Offering easy integration into our clients’ existing software framework is a key feature for us during the development process.
A number of market participants are struggling with collateral optimisation. What is your take on this?
Developing an operating model for a collateral optimisation process is one of the most complex topics that the industry has come across in recent years. First of all, the system frameworks currently in place mostly allow only for a decentralised view on certain aspects of the overall trading operation. However, gaining a centralised view across business lines such as repo, securities lending and cleared and uncleared derivatives is crucial. Ideally, this is achieved in real time.
Secondly, static data requirements need to be met. Information from the suite of collateral schedules needs to be extracted and stored in a centralised place so that it can be accessed easily.
Once these prerequisites are met, optimisation algorithms need to be defined. This is where most mistakes are made. Market participants have to ensure that the optimal collateral allocation is determined under realistic market conditions, taking into account practical considerations such as opportunity costs, settlement deadlines and costs, bilateral counterparty relationships, and much more.
Last but not least, I cannot think of any system that even comes close to delivering all of these requirements out-of-the-box, meaning the specification and development of a client -specific software solution will be a significant part of any collateral optimisation project.
Overall, this is a good example for the holistic approach that Comyno takes when working with clients. From the initial business analysis and requirements gathering exercise, to the definition of optimisation algorithms all the way to the execution of an optimisation process via tailored software solutions, we offer support during every single phase of the project.
Finally, centrally cleared securities lending has gained momentum during the last year. What is your position on this controversial topic?
Central clearing has been a discussion topic within the industry for the last several years. Lately, the level of engagement on this topic has been increasing and we expect that market participants will continue to explore the potential role that central counterparties (CCPs) will play in the future.
At Comyno, we see the CCP as a crucial tool to actively manage and mitigate liquidity, credit and regulatory risk. We identified the emerging significance of CCP-based models relatively early and positioned ourselves accordingly.
With more market participants now looking at this topic, we have been approached a number of times to support clients’ activities.
We cover all services, from building, presenting or validating a business case, all the way through to its specification and implementation. We can also offer our clients a software package specifically tailored to the demands of a CCP-based model: our C-ONE Lending CCP Hub. This is another great example of how we can support our clients from start to finish.
