Tonic Consultancy
Following on from his recent appointment as the head of Americas at The Tonic Consultancy, Jor Molchan sits down with Justin Lawson to discuss the current hot topics facing securities financing
Congratulations on your recent appointment at Tonic — can you tell us about your new role?
In my role as the head of Americas, I lead our North American client relations, delivery and people — all with the support of an excellent team. I am responsible for helping our Americas clients execute their critical business goals, via Tonic’s expertise-led model.
What led to your decision to join the team at Tonic?
I joined because the Tonic story is an impressive one that I wanted to be part of. The depth of expertise, the company’s service model that puts clients first, the variety of transformational capabilities and Tonic’s impressive client list, all made this an attractive opportunity from the beginning.
Add to this the firm’s commitment to excellence, a great culture and a stellar team of specialists, the decision to join was an easy one.
How does your previous experience in the industry support your role as Tonic head of Americas?
I believe this role ties together my varied career in financial services. My early years included securities finance, asset servicing and global custody — all key domains for Tonic. After that I moved into financial services consulting, where I led capital markets advisory programmes, oversaw delivery and managed a book of client accounts. I have lived through a varied set of domains, firms and consulting rigour that matches Tonic's model well.
My approach to success in previous roles has been focused on team-oriented problem solving. Turning large groups of people into organised and self-actualised teams is the best way I know to achieve more. I expect to leverage the same approach at Tonic, helping clients reach further success.
Can you describe Tonic’s service model and what it brings to the industry?
Tonic is a Capital Markets consultancy that does things differently, which was part of the appeal for me. As I have previously said, Tonic is expertise-led, which ultimately means we protect and accelerate our clients’ business goals in all areas, including regulatory, commercial and resilience.
Our consultants are a hand-picked set of practitioners, who all have the deep domain and transformation expertise required to deliver on Tonic’s service model. They have all ‘been there and done it’, with strong views on industry best practice. This is backed by the firm's client-first service model, which focuses on integrity throughout.
We build long-term, trusted partnerships with a global set of clients, across the UK, Europe, Americas and APAC. High-focus domains such as collateral, post-trade, treasury, risk and digital are our foundation, but we are continually adding more areas to the mix, based on our clients’ evolving needs.
We provide the same suite of services across all our domains, including advisory, transformation, educate, and operate.
Currently, what are the key focus areas for your clients?
Hot topics are always driven by the current climate. The longer-term market volatility we are now used to has increasingly focused our clients on profit protection and growth — both cost savings and revenue building — as well as staying resilient within a period of higher uncertainty.
Inevitably, regulatory transformation remains a key focus, but firms are looking more creatively at how to get compliant in ways that protect profits and resilience in the long-run.
Some of the key things for our clients right now include Basel Endgame, US Treasury Clearing and a raft of resilience regulations.
For many of our clients, this includes steps towards real-time inventory management, resilience target operating models, new capital and liquidity solutions within securities finance, collateral optimisation and analytics, data target state infrastructure and a pathway to digital solutions, such as tokenisation and distributed ledger technology (DLT) settlement.
Amid the volatile climate, what are the current securities finance trends that firms are being exposed to?
One that really sticks out here are the record-breaking securities finance revenues of US$10.7 billion in 2023, growing almost 10 per cent year-on-year. This can mainly be attributed to the heightened interest rates, increased volatility in the equities market, and the demand for specials. The volume surge means firms are increasingly investing in scalable and resilient capabilities across trading and operations, to maximise future profits?.
Another key trend is a renewed focus on efficient use of balance sheet and capital, with Basel Endgame and other regulations further eroding the profit base across the market. A number of firms are now focused on joining or building new capital-efficient service models, including derivatives synthetic models, peer-to-peer, sponsored clearing, triparty and more.
We see a parallel focus on profit and capital analytics, to leverage pre-trade costs within the trade execution process, plus collateral optimisation techniques — both pre-trade and post trade — to minimise costs once the trade has been executed. The move towards real-time, holistic inventory management, is also a connected trend throughout the industry. More firms are now signing up to digital solutions, via tokenisation and DLT use cases, for resilience and optimisation drivers.
Another area to highlight is the US Treasury clearing regulation — a game changer for the clearing of US Treasury cash and repo transactions. Many firms have started to define their new front-to-back operating models, to ensure they are ready to execute from late 2025 onwards. Minimised profit impact is the goal here, based on the net-new collateral and funding requirements that come into play. Clearly, this provides opportunities for service providers to expand their clearing offerings, with new clearinghouses and agents also ‘joining the party’. It is definitely one to keep an eye on, that will drive a new industry model for us all.
How does Tonic help its clients meet these challenges?
When faced with complex or heavy challenges, a client wants to depend on a company that has ‘been there and done that’.
At Tonic, it is the group expertise pool that brings real value to our clients, with a collective relevant experience spanning hundreds of years, all for our clients to tap into. That also comes with a great network of industry participants, vendors and service providers, to protect and accelerate our clients’ decisions.
Tonic specialises across the full suite of advisory, transformation and implementation services, so we can help our clients wherever they need the most support. Some clients initially focus on the advisory services, such as strategy, vision, benchmarking, training and content creation.
Tonic’s Health Check service, for example, is a powerful vehicle for firms to gain accelerated, targeted recommendations on their key pain points. In turn, our clients can then quickly move into tailored solutions and execution. Our health checks are used by clients across all manner of use cases, with the Securities Finance Resilience Health Check our latest module.
Most clients then leverage Tonic’s Transformation suite to accelerate their target state. This includes regulatory solutions, target operating models, vendor selection, data strategy and programme governance. Implementation services are then available as needed, to protect key goals such as regulatory compliance, platform integration, testing, data readiness and more.
Tonic has seen impressive amounts of growth in recent times. What is the story here, and how has your domain coverage evolved over the last few years?
It is no secret that Tonic has grown significantly since its inception in 2018, especially post-Covid.
The growth has come in several forms. Expansion of our client base, domain coverage, and growth in our people — both our specialist practitioners and our senior management team.
A huge checkpoint in the growth story came in 2022 when ‘Margin Tonic’ became ‘Tonic’. In truth, it seems Tonic had grown beyond our ‘Margin’ roots long before then, as clients asked us to apply our expertise-led model to a wider set of domains.
Tonic has since replicated the expertise within our collateral practice — where today we have over 270 years combined experience — to our wider set of domains, including post-trade, risk, treasury, and digital. As an example, we now have over 225 years of post-trade experience, 100 years of risk experience and more than 50 years of treasury experience, with more uplift to come.
Tonic’s fun, dynamic and hard-working ethos has no doubt played a big part in our success, by providing a healthy, collaborative workplace, with lots of room for everyone to grow.
What is the motivation behind expanding in the Americas and what is your strategy to achieve this?
This actually started with Covid, which was a turbulent period for all of us. During that time, geography mattered less and our Americas clients wanted the best expertise available from Tonic, regardless of where they sat.
Our Americas clients have been asking Tonic for a while if we can do more for them in the US and Canada, via the same expertise-led model. Tonic’s Americas client relationships are very strong, so we are focused on getting closer and delivering more value to them.
Today we have a growing Tonic Americas footprint, but we want to demonstrate our commitment to our Americas clients by investing more, helping them to hit their key goals.
Going forwards we will provide our Americas clients with a more scalable and flexible service model, underpinned by the same deep expertise. We will cover all of our core domains, and some new ones.
Considering Tonic’s continued growth, what heights do you see Tonic reaching in the next two years?
We are on a good course, but there is lots more we want to do. The consistent goal is to help our clients hit more of their key business goals, in an increasingly complex market environment.
In the coming years we will expand our domains where synergies are strongest. We will grow our team size, scale, flexibility, and the value we bring to our clients. We will also continue to bring the most relevant capabilities to clients — whether service, region or others — driven by their best interests.
