Delta Capita won the Best Structured Products Technology Solution with its inSPire Due Diligence platform at this year's SRP Europe 2024 awards.

The UK financial services and tech provider was recognised as the Best Structured Products Technology Solution provider in the European structured products market in 2023 at the SRP Europe 2024 conference.

The singular consolidated request for information delivers huge efficiencies for distributors who often deal with several issuers in their structured products activity - James Baker

The inSPire Due Diligence product incorporates several themes in the marketplace - mutualisation of services, consistent standards and a globally accessible service which can be tailored to regional variations.

"Product governance has more broadly been a key theme for a number of years, as well as the shift towards digital records, and when you look at our due diligence service, it checks all these boxes," James Baker (pictured) chief business development officer for structured retail products at Delta Capita, told SRP.

"The due diligence service provides not just a questionnaire and attestation process, but also a complementary ongoing screening process to ensure that information remains continually up to date," said Baker. "The singular consolidated request for information delivers huge efficiencies for distributors who often deal with several issuers in their structured products activity."

According to Baker, the service is now being recognised by different market players and testament to that is the platform's growth globally over the last five years.

"We now have more than 600 distributors and 13 issuers collaborating to use the service, which reflects the success of the platform and validates the hard work, led by Richard Archer and team, that has gone into it since we started with three banks with a vision to harmonize and implement efficiencies by coming together back in the day," he said.

What are the main challenges facing the structured products market from an fintech perspective?

Mark Aldous: The market trend, which has been going on for a long time, is the requirement for issuers to cope with scale. The market has continued to shift from low volume large size issuance which was distributed as broadly as possible, to a very different model of smaller issuance size and multiple products with distributors searching for pricing for their products from as many issuers as possible.

With that scale, a lower latency is required to be able to respond to those requests and issuers need technology that is scalable and can adapt to products that keep evolving. Our services and technology are built around those two requirements.

We can scale up to any size in terms of volume or capacity very quickly, and we look at automating repeat processes. We have built a whole suite of tools to allow us to put controls in place so that you can make changes, test those changes and deploy them very rapidly.

What are the drivers of tech adoption in the market?

James Baker: Beyond our mutualised due diligence service, our inSPire Platform offers a range of traditional manufacturing services that cover the full issuance lifecycle.

These include documentation, governance services, access to stress testing and analytics, and application of other forms of pre-trade control checks and worklow at the issuance level. Our lifecycle services include an orchestration and connectivity service, making sure documents and data go to the right place at the right time. The platform also models a digital representation of lifecycle events.

We have now automated all the processes from price discovery to execution, document generation and the operational lifecycle - Mark Aldous

Over the years, we've built a full suite of services to cater for both big and small players. When we began our journey of supporting tier one issuers the focus was on providing one or two services, often accessed via API.  As we moved to support more issuers, we realised they needed us to bring many more services together. That took us into a different phase, focusing on the workflow needed to join up the services and deliver everything our clients need, almost out of the box.

How would you describe the competitive landscape in the structured products platforms space?

James Baker: If you follow the journey of platforms, even the most developed platforms typically reach a point of saturation. People used to speak a lot about generic formats to make structured products more scalable, but that comes at a cost, and you must have really strong controls over the permutations. I think at some point, you just have to accept that having perfect levels of automation at the 99th percentile is going to be a difficult thing to achieve.

Within our platform we leverage automation for our own efficiency of delivery and to lower both operational risk and costs.

Whilst we have extensible and generic models to ensure we maximise automation across the full spectrum of trades we focus a lot on embedding our automated services in workflows so they can both flow quickly and automatically for full STP, but also support a level of manual intervention and exception management if needed.  We aim to avoid binary outcomes where ‘it's either automated or it's manual’, and instead work to make sure that we leverage any automation we do have to partly complete each process, minimising the manual steps to at least achieve partial automation.

Mark Aldous: We have now automated all the processes from price discovery to execution, document generation and the operational lifecycle. We take that automation all the way through the product lifecycle. But when you look at the scope of what can be automated in terms of evolving products or business lines, there is always something that could benefit from automation.

We are now using AI to continuously expand what we have automated. We use machine learning to interrogate what's coming through the system to identify what needs to be automated and why. We then use our flexible tooling to rapidly address that automation gap.

Where is the growth coming from for Delta Capita? What opportunities are you looking for?

Mark Aldous (right): Banks are looking at the cost of maintaining their existing capabilities. As they look at the gaps and how to get around the ability to extend their automation through to the tail of their products, we see enormous opportunities for us to deploy our tooling further. Most of the big banks have some level of automation, some level of electronic capabilities, but very little of the control or the AI tooling that we have.

We also see an opportunity with issuers that maybe have not been able to make that transition from low frequency large issuances into this new world. We can provide them the ability to access this market, without having to invest in that infrastructure, and have the full standard capability operations because they can plug and play into our platform based on their requirements.

What is the role of platforms in growing the structured products market and respond to new market needs and dynamics?

James Baker: If you look at the way the market has moved in recent years - credit, rates - there is always room to do more. We cover all the asset classes, and certainly we've worked with a lot of banks on products where salespeople still have a lot of issues trying to get those products to market.

This is a competitive marketplace, and you need to respond as efficiently as possible - James Baker

If you're not connected to all of the dealing platforms and market infrastructure, you can be cut off from the marketplace – you need something out of the box to get going. The services we provide in terms of connectivity can accelerate those processes. That's something that is very appealing to the smaller clients.

When people invest in a digital environment, they expect to be able to build more tailored products. As a result, the ticket sizes fall whilst product variants may widen. You need to be able to this digitally and that's a hard challenge. Even when you have  85% the main payoffs covered and it's all STP, you still have the remaining products.

This is a competitive marketplace, and you need to respond as efficiently as possible. Using data analysis and techniques to try to assess incremental efficiencies and get as close to STP as you can is a different type of beast to the more straitjacketed or monolithic ‘full STP’ approaches of the past. To achieve gains, you must have a different toolset and be as modular as possible to deliver efficiencies within that other 15% of the products.

What is on Delta Capita's roadmap? What will be the focus going forward?

Mark Aldous: The control environment we've built around product governance enables issuers to identify the products that are suitable for the broader market, and then consistently apply new controls so that they can be comfortable that those products are going to the right people.

Our due diligence service allows our issuer clients to really understand the distributors they're working with, understand the client base that they have, and therefore the place in which those products might end up. We do think there is scope to expand the structured products market as there are broader sets of potential buyers of these products, but product providers must ensure they are suitable to them.

We have expanded rapidly over the last four or five years. We have now a global footprint with offices in Europe, Asia, and the US and our business will include around 1,500 people globally by the end of 2024.

We have a number of big strategic initiatives currently underway. In the broader derivatives market, we've launched global OTC operations service, building on some of the strengths that we have seen from our activity in the structured products market. We're accelerating that opportunity, through lifting out capabilities from banks.

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