OTCX: No buy or sell side bank out there has one global solution for each asset class

OTCX Trading's efforts to capitalise on opportunities arising across the pond are paying off following a recent deal with an undisclosed US bank. The multi-dealer request for quotation (RFQ) platform is "now live on a multi-regional basis for structured products with a very large US private bank based in New York and London", according to Melanie Newton, structured product business development director at OTCX.

The platform, which is aiming at becoming a globally established hub, is also planning a big push in Asia in 2018 as well as new features on the platform.

OTCX continues to grow and has added a number of professionals over the last few months including Sean Morgan (pictured), former head of investment management UK & Ireland at Finastra, as chief revenue officer and global head of sales - who joined the firm's office in London in February.

"We have increased our headcount across several functions and hired a number of developers to keep progressing with new clients coming on board," said Newton. "We are now multi-asset and multi-regional; we have expanded our equity-linked structured product offering to include FX and credit (CLNs). "

Efficient pricing remains at the top of the vision agenda but supporting the digital initiatives on OTC derivatives (interest rate & equity derivatives) and structured products of its clients is also a core OTCX offering, according to Newton.

"OTCX has been successful in enabling our clients to scale their businesses more profitably and with greater governance," said Newton, adding that the platform has used the expertise and understanding of the local regulation, eliminated the substantial number of emails during the negotiation period and reduced operational risk. "Essentially, clients are saying that they are simply doing more, faster; they have experienced significant time efficiency gains for both intra and end of day processes."

Global head of sales Sean Morgan who has full responsibility for looking after OTCX's buy and sell side community, "making sure that there is enough liquidity from issuers in the portal", said that OTCX is now "best known for delivering strategic solutions, quickly, that are innovate yet proven, multiregional and cost effective".

"OTCX has proven in a very short period of time that it can respond to demand and client requests very quickly and well within the client's expected timeframe," said Morgan. "The platform has been able to roll out solutions for one of the world's largest issuers of structured products in a very dynamic and efficient way."

OTCX is also building a sales team and a distribution network to onboard the buy side, "while working with issuers to help streamline the pricing and issuing process", according to Morgan.

"There is a direct benefit for the end clients of structured products from distributors and issuers digitizing their processes," said Morgan. "Moving away from manual processes helps drive down costs, reduces operational risk, increase efficiencies, including time, and scalability all round, with the best outcome for everyone. For example, we have seen a significant client reinvest their cost savings back into their business, which has now grown as a result."

OTCX has also been "very successful" in meeting the local and regional regulatory requirements that clients have to meet on a daily basis, according to Morgan.

"Being able to respond to the needs of a large global player with different local regulatory needs shows our ability to deliver and add value to our clients," he said. "Our set up is multi-regional and we think there's plenty of scope to offer this expertise to other large clients looking for a global solution. We think we can leverage what has been already been achieved with our existing client base for new customers."

The structured product world is going to become digitalised in many areas, like the equities and futures markets did in the late 1990's/early 2000, with FX following shortly afterwards, according to Morgan.

"Initially structured products will continue to move away from what was traditionally a very manual quoting and book-build process (via a substantial number of emails)," said Morgan. The utopia is to have one global solution for structured products, but the reality is that no buy or sell side bank out there has one global solution for each asset class. We have seen similar attempts with a regional approach, but we want to make sure our differentiating factor is 'speed to market'."

In the near term OTCX will incorporate auto term sheet generation, auto-pricing, integration to help with regulatory and pre-trade / end of day processes. "Digital initiatives are likely to orientate around the customer and empowering IFAs / RMs / sales and other participants contributing to the value chain, enabling businesses with the ability to scale profitably," said Morgan.

Regulation has proved difficult for clients and it changes on a regional basis, impacting areas such as documentation and reporting, according to Newton.

"We have the functionality to exchange term sheets and other key regulatory documents such as Priips Kids," said Newton. "This is something manufacturers and distributors want. Connectivity and pricing are very important because we can make the quoting process a lot more efficient. We are also working closely with issuers to ensure auto-pricing is part of our tool kit."

The OTCX platform was launched in 2014 by a team of buy side technology experts with the aim of bringing cutting-edge functionality and product design to the OTC market, as well as providing a better OTC environment for buy side firms, including institutional asset managers, hedge funds, sovereign wealth funds and private banks. The platform has 14 issuers and global liquidity providers plugged into the platform which does not share its infrastructure with other firms or services.

OTC derivatives workflow solutions a huge opportunity, OTCX