Numerix: ‘Click and trade’ platforms have huge growth potential
Following the launch of its integrated multi-issuer investment products distribution system (IPDS) with DBS, Leonteq and Avaloq in March in Singapore, SRP spoke to Steven O’Hanlon (pictured), chief executive of Numerix, about the latest developments in pricing and valuation as well as the company’s plans in the multi-issuer platform market.
How has pricing/valuation fared post-Lehman Brothers?
While we saw the market reaching a near collapse during the credit crisis, over the last couple of years there’s been a resurgence of activity in different markets and theatres around the globe. Specifically, we have seen a surge in activity in areas such as Taiwan and Singapore, which has fuelled a need for more sophisticated pricing and risk analytics solutions across the region.
What would you say are the main developments in pricing/valuation over the last few months?
We see the development of multi-issuer dealer platforms as key for structured products and an area where Numerix can add value. We recently launched an integrated multi-issuer investment products distribution system (IPDS) with DBS in Singapore with the aim of enhancing product distribution, trade execution and risk management capabilities of structured products across the Asia-Pacific region. This will revolutionise the way DBS delivers its products to investors and has the potential to increase its structured products significantly as a result.
In Taiwan, we have also focused on addressing the increasing demand for structured products. In this market, we have created a solution specifically for Treasury Marketing Units within banks that will address some of the key challenges and regulatory requirements they are facing. A number of players have already signed up for the service, which is helping them to better serve their client base.
Why are multi-issuer platforms getting so much attention from structured products participants?
It’s well-known across the industry that price discovery and the order placement process for structured products is complex, manual, error-prone, and time consuming for both sell- and buyside institutions. Also, processes and workflows can be quite different at each institution.
The aim of the project is to enhance the offering and distribution of structured investment products: a seamless front-to-back system to enable partners to focus on their clients. Overall, IPDS will enable efficient trading between product issuers and investors, automating price discovery and order execution while increasing competitiveness and trading volumes.
What opportunities do you see in multi-issuer/click and trade platforms?
The development of ‘click and trade’ platforms not only provides new opportunities for us, but has the potential to become a very large business. Once established in Asia, the next frontier for IPDS could be the European market. In Europe, we have seen the market moving towards the use of forward-looking scenarios to project how products are meant to perform in different market environments in to the future. Leveraging projections at the time of issuance provides better clarity around product performance and decision making.
While multi-dealer platforms are not on the agenda at this time, the US market is still in a cross-roads and there have been some issues around the use of proprietary indices and the valuation of those indices. Regulators have introduced new requirements around the disclosure of these indices and new opportunities in the annuities space where we can also leverage our capabilities and expertise.
With four multi-issuer platforms now active in the Asia-Pacific region, is this part of the market getting crowded?
While other IT platforms (such as AG Delta/Contineo) have gained support from a number of banks, they are not viewed as independent entities. We believe that we and our partners DBS, Leonteq and Avaloq are on the right path to be a significant player in the multi-issuer platform market, and have already started to attract attention from other private banks in the region.
The Apac market is diverse enough to have two or three players, but we’re in this as a ‘winner take all’. Ultimately, the multi-issuer platform market will have one player standing in the end. While others are struggling to attract distributors, our IPDS platform has signed one of the most important distributors of structured products in the region.
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