The crucial importance of trade data collaboration
Winner of the 2023 European Markets Choice Award for Best Market Infrastructure Operator, FIA Tech has been instrumental in developing material benefits for the buy- and sell-side through its recently-launched Trade Data Network, alongside other initiatives. We speak with Nick Solinger, president and CEO of FIA Tech, to learn more.
What has been the driving force behind FIA Tech’s activity in market infrastructure space this last couple of years?
Since our launch, FIA Tech has continually worked with the industry to develop and provide key services and technologies which help market participants reduce risk, mitigate operational costs and meet market and regulatory challenges. We start by listening to the industry – we have buy-side and sell-side advisory committees which drive our focus. Leveraging this consensus-driven approach, FIA Tech has been able to solve long standing problems in the industry. Some of FIA Tech’s achievements include centralising brokerage settlement across more than 40 global exchanges, improving the productivity of brokerage teams by a factor of 3X, reducing time to execute give up agreements by 33% while also identifying and eliminating sources of friction across the industry, and worked with the FCM community, clients, exchanges and regulators to reduce costs of regulatory compliance. Since 2021, when we raised funds to from a consortium of first ten, (now eleven) Investment banks, this goal has become even more central to our DNA as an organisation and drives everything we do as a company. Building networks such as the Trade Data Network and Databank Network plays a vital role in this.
How did you get the idea for TDN?
When Covid lockdowns occurred, our clients were disrupted in numerous ways, but a combination of unexpected work from home and high volumes and volatility created operational backlogs the likes of which had never been seen. Our role in brokerage settlement meant we received post trade give up flow in real time across many markets, in parallel to what the clearing members should be receiving from the exchange/CCP. In the midst of the disruption, our clients turned to us to see whether we could help unravel the chaos and answer basic questions like “Where’s my trade? Which trades are left unclaimed by a clearing broker?” We assembled a team which rapidly created a transparency reporting data warehouse – in under a week – with real-time tracking of trade status, and made it available to clearing members and to some of the exchanges themselves. Since the pandemic and more recently the invasion of Ukraine, it became clear that the industry was calling out for a robust, industry wide technological solution for allocations and transparency of the post trade process in ETD. Starting in 2021, we have been working closely with the industry to build our TDN solution – with 16 banks and 50+buyside institutions in our working groups. More than 8,000 futures market participants use one or more of FIA Tech’s services, giving FIA Tech unique opportunities to provide services across the entire market – buyside firms, end users, FCMs, introducing brokers & market makers.
What exactly is the problem it is trying to solve?
The Trade Data Network (TDN) is an initiative that provides a shared ledger of trading information to address the fragmentation and lack of transparency in exchange traded derivatives (ETD) post-trade processing. The successful rollout of TDN is also expected to help reduce clearing delays for brokers, improve processes for clients and eliminate frictional costs.
The initial rollout of TDN is focused on allocations processing and trade confirmations between clients, executing brokers and clearing brokers, with trade lifecycle transparency across the multiple brokers and the clearinghouse on each trade. Additional features include benchmarking, metrics tracking and reporting to drive best practices across the ecosystem. The initiative is also designed to drive value for the independent software vendor (ISV) community by reducing complexity in delivering services to clients.
What had been the reception from the industry?
The industry is thrilled with the development of the network. One example – firms utilising the Trade Data Network can now securely replicate and store all trading activity at any exchange connected to TDN, in support of a quicker recovery in the event of a systemic outage such as a cyberattack or technology failure. Earlier this summer, FIA Tech successfully completed a stress test, demonstrating the ability to securely capture and replay five trading days of activity in under four hours for all existing clearing firms using the platform. Systemic outages are the sort of things that keep bank CEOs awake at night so any initiative like TDN is well received.
You have also been building out the Databank Network – are the two interlinked?
The success of our Trade Data Network initiative builds on our efforts to standardise product reference and compliance related data for the industry- we started with the underlying reference data, as that’s a key building block for standardising the representation of trading activity. Databank Network is an effort we started in 2019, and represents FIA Tech’s initiative to bring together independent software vendors (ISVs) , exchanges, clearing houses and other data providers into an interoperable global network simplifying the use of reference data, analytics and software solutions from participating firms. It unifies reference data from over 80 exchanges and central counterparties (CCPs), leading index providers including FTSE, MSCI, S&P, STOXX, independent software vendors CQG and TT and data vendors EDI and Factset. Having the core datasets completed, we are now widening the reach with strategic partnerships with ISV, platform providers like Symphony and key market participants such as fund administrators, outsourcing firms and custodians.
While TDN and Databank are separate initiatives, both seek to improve collaboration and promote global interoperability for users of ETD products.
What are you trying to achieve with the Databank Network?
The Databank Network grew from our work providing global position limits and exchange fees data to the industry. Leveraging our Databank platform and team, we partnered with a wide range of data providers, ISVs and exchanges to enhance our data sets, expanding our services to cover a much wider range of product and entity reference data. Our new product suite has positioned us to become the ‘one-stop-shop’ and the key provider to a broad range of participants. Our strategy for the network brings together data that has been siloed by exchanges, CCPs, regulators, and ISVs into one network aimed to assist clients in cost reduction and operational efficiency. Our goal is to continue to scale our business and partnerships, create industry standard data sets, and evolve our product offerings to align with the needs of the client.
We are simply trying to achieve a standardised and cost-efficient solution to the industry that makes data available anywhere our clients are.
What do you think is the ETD industry’s number one challenge at the moment?
A range of forces in the market has created some very unique challenges to operations and technology teams. Clearing in ETD has concentrated into a smaller number of firms processing higher volumes of trades. Use of algo execution has driven down the average size of a trade – meaning systems and teams are handling larger and larger volumes of transactions to process the same notional volume of trading activity – a 100 lot futures trade a few years ago may have been 1 to 5 transactions, today it might be 20 or even 50 due to the use of algo execution. These dynamics create an operational fragility for buyside and sellside market participants – if there are breaks in the automation, disruptions to the technology stacks or significant market events, operations teams can be overwhelmed and face a daunting path to recovery. Our aim is to eliminate the breaks and disruptions where possible, provide improved tools for automation and provide tools and transparency for operational resiliency in the midst of disruptions.
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