New platform fills post-trade service gap for PBs: Contineo CEO
Multi-dealer platform Contineo has launched a new solution for private banks in a bid to fill a servicing gap in the structured product secondary market…
Contineo launches private banking tool for structured products
Designed as a client engagement tool for structured products, the offering allows wealth managers to monitor product events and the underlying performance of their clients’ investments.
Once a client places a trade, the tool allows relationship managers to get a portfolio overview, indicative bid prices and issuer notifications.
Additionally, the platform provides details of the performance and barriers to watch for the underlying structured product, as well as corporate actions and client reporting and documentation.
CEO Antoine de Charnacé said the product has already gone live at one of Contineo’s eight private banking clients in Asia.
‘Similar to having a portfolio overview on your positions in equities or bonds, the private banks are in need of a posttrade functionality for structured products,’ he told Citywire Asia.
‘The level of posttrade services may differ from issuer to issuer. The new tool is a way to get oneclick reporting and be able to retrieve all product details across all the manufacturers in one go,’ he added. Contineo is currently working with 15 structured product issuers.
The new launch builds on the Hong Kongbased firm’s existing product suite, which includes a tool that allows private banks to send pricing requests and place orders for equitylinked structured products.
SIX joins Contineo as strategic partner and investor
“Our success was built on a consortium framework that allows top tier institutions to join together to build a utility service that drives costs down and creates market efficiencies,” he said. “The commitment from SIX embodies our core principals of operating an open and shared network that benefits all financial institutions.”
Christoph Landis, Division CEO of SIX’s Swiss Exchange, added: “We are very pleased to bring our European leadership and experience to Asia through Connexor, our high-performance infrastructure for product data. We are looking forward to working with the leading structured product network in this region.”
“SIX brings new technology, expertise in the European structured product market and an important new business opportunity,” Munoz added. “Over the last year we’ve more than doubled the number of private banks and issuers on our network, enabling us to extend our post-trade data capabilities. SIX is a leading exchange provider in Europe and we look forward to incorporating their best in class features into our offering.”
SIX internationalizes its product data platform CONNEXOR
Today, SIX announced its new strategic partnership with Contineo, a Hong Kong based leading trading platform for structured products in Asia. SIX will support the standardization of the Asian structured products market by providing its high-performance product life-cycle infrastructure CONNEXOR in the first half of 2018. This offers synergies and scale opportunities to its shareholders, clients and the Asian market.Joining the consortium of Contineo as a strategic partner and investor is a first major step towards the internationalization of the CONNEXOR service. The geographic expansion is intended to standardize processes along the value chain and the life-cycle management of structured products internationally. This allows shareholders and clients of SIX to utilize their established set-ups already used in local markets also outside of Europe and thereby benefit from synergies and scale in return. Contineo’s network of issuers, private banks and wealth management firms benefits from the long established infrastructure experience of SIX in order to grow the Asian market for structured products.Christoph Landis, Division CEO SIX Swiss Exchange, commented: “Today, we are very proud to announce the internationalization of CONNEXOR and happy to see that more market participants around the world will enjoy the efficiency gains that our unique offering has already provided reliably to the Swiss marketplace.”Mark Munoz, CEO of Contineo, commented: “This new partnership confirms our core principles of operating an open and shared network that benefits all financial institutions by reducing cost and increasing efficiency.”CONNEXOR is an infrastructure for financial products data. It offers market participants a series of services throughout a financial instrument’s entire life-cycle and supports the fulfillment of regulatory obligations such as MiFID II or IRS 871(m). The central, standardized capture and maintenance of product data simplifies workflows and reduces the number of interfaces. As a result issuers, data vendors and data recipients benefit from substantial efficiency advantages.
Contineo is the first industry supported, open trading platform for private banks and wealth management firms to access issuers of structured products. It launched in January 2015 with the backing of most of Asia-Pacific’s key structured products houses and has built up a strong issuer base. Besides SIX, its current shareholders include AG Delta, Barclays, BNP Paribas, Goldman Sachs, J.P. Morgan, HSBC, and Societe Generale.
SIX Swiss Exchange partners with Hong Kong trading platform Contineo
Connexor provides a range of services over the complete life cycle of a financial instrument and enables to meet regulatory obligations such as IRS 871(m) or MiFID II.
The centralized, standardized collection and maintenance of product data allows to simplify workflows and decrease the number of interfaces, providing issuers, data vendors and data recipients with better service.
SIX is expanding the Connexor service to standardize processes along the value chain and the lifecycle management of structured products across the globe.
From the first half of 2018, Connexor life cycle management infrastructure will be available to the customers in the Asian market.
The service allows SIX Swiss Exchange’s shareholders and clients to use set-ups from outside of Europe.
Contineo’s network of issuers, private banks and wealth management firms can also use the infrastructure of SIX to expand structured products of Asia market.
SIX Swiss Exchange division CEO Chris Landis said: “Today, we are very proud to announce the internationalization of Connexor and happy to see that more market participants around the world will enjoy the efficiency gains that our platform has already provided reliably to the Swiss marketplace.”
Contineo CEO Mark Munoz said: “This new partnership confirms our core principals of operating an open and shared network that benefits all financial institutions by reducing cost and increasing efficiency.”
Contineo is an industry supported and open messaging network, which interacts private banks and wealth management firms with issuers of structured products.
MIPs: Integration is in motion but it will take time
Similarly, Contineo CEO Mark Muñoz commented that most private banks in Asia are migrating to multi-issuer networks. “The market is still young for this type of technology but it is also the one that people are embracing,” he says.
For Milind Kulkarni, managing director and CEO at FinIQ, priority, even at the smaller banks, is given to productivity improvement and elimination of errors arising from overuse of email tools. According to him, however, mega banks are always expected to build their own in-house platforms. “In a nutshell, buyside banks without strong internal investment banks are the first ones to adapt MIPs,” says Kulkarni. “Then come the mid-sized banks and eventually the mega banks, which are selectively plugging external MIP components. Over next three years, we see everyone coming on board in some format or another. However, the second quarter of next year would be the cut-off point for experimentation and then, only the solid offerings will prevail.”
Regarding the current condition of the market, Muñoz points that “on the one hand, there is an imbalance between what the investment banks can support and what the private banks want to price and trade and on the other hand, certain investment banks are more technically capable than others, which creates the second type of imbalance.” According to Muñoz, there is a good number of investment banks in the market that can support the streamline protocol like FIX technology and others who cannot and are on email which creates limitations to what the private banks want.”
According to Wood, the management aspects of implementing a multi-dealer platform in a private bank are quite significant and this is where the solutions are not getting as much traction as people have expected. However, the transformation of the working practices and organisations take time and are a significant undertaking, says Wood. “In our experience, the multi-dealer platforms are relatively simple to set up and integrate into the structured product desks of private banks, but these platforms will become really transformational when integrated into the full client facing business of the private banks,” he says. “We have got the platforms up and running and the technology works. Integration is the next step but it is taking time.”
Additionally, according to Wood, multi-issuer platforms currently have “good and comprehensive” offerings. “Of course, there are things that need to be done but I don’t think the current capabilities in terms of underlyings and payoffs, for instance, would be a block to extending the platforms,” he says. Therefore, the full lifecycle of the service offering is where the platforms still have some work to do. “Banks including ourselves have got the full STP capability where you can place a trade on a multi-dealer platform and it will go through into our booking systems. You would get automated documentation, etc. all the way through the cycle,” he said. “The actual multi-dealer platforms themselves provide a pretty comprehensive service but they are limited to some extent by the product providers.”
Similarly, the addition of new payoffs and underlyings isn’t a critical step in the development of the multi-issuer platforms, according to Kulkarni. “Current electronic variations allow clients to express their investment views adequately well,” says Kulkarni. “Moreover, banks can’t possibly train relationship managers (RMs) on so many diverse payoffs.” However, on the products desk side, in the next few years the so-called non-flow structures, as they exist now, should turn into electronically priced products, according to Kulkarni. “But, for the RMs side, on average, one or two new payoffs is what I would expect per year,” he says.
Contineo is expanding its offering by adding bonus certificates to its network as “there is a demand for this type of product from the private banks side”, according to Muñoz. “We are seeing about a 25% increase in volume this year compared to last year,” says Munoz.
According to Wood, the volumes on the platforms are driven by products sold by private banks that are common in the Asia market today such as accumulators, equity linked notes, fixed coupon callables.
Regarding the issue of fragmentation, the Asian MIP segment remains dominated by two core multi-dealer platforms in the market – Contineo and FinIQ. “The choice between them comes down to what clients are looking for from the service offering,” says Wood. “It slightly depends on the need of the customer, but I don’t think there is a particular demand for consolidation.”
According to Muñoz consolidation is not necessary at this stage. “What is unique to Contineo is that we allow third parties, including other technological providers, media companies, etc., to connect to our platform,” says Muñoz, adding that the consolidation is happening at private bank level. “At a technology level for multi-issuer platforms, I don’t see consolidation because there is just a handful of companies that can provide this type of multi-issuer access.”
Structured products, customised inputs, customised targets, electronic pricing, electronic orders, multiple suppliers, multiple buyers, complex pricing request methods and hundreds of underlyings on shared cloud infrastructure is like an extreme use case for the finance and technology combo, according to Kulkarni. “Not all ventures can sustain the pressure of continuous software development, ongoing implementations and production continuity in continuous time,” says Kulkarni. “Products such as FXD, FX SP, FI bonds, retail EQ-linked are not on the radar of extreme productivity as expected from the EQD wealth MIP solutions,” he says. “Once those products join the equity structured products that would be dream state to us.”
The ability to do pricing and trade execution is a core competence for multi-dealer platforms, according to Muñoz. “The value-added that you get beyond that is how you can drive further efficiency through the full life cycle of the product and I think that is where we would see further innovation from the platforms over the next years,” says Muñoz. “The work we have done in the Contineo Consortium to normalize and standardize the products has brought some real value to the people using this platform because they have highly standardized products. We see the opportunity to do more of that work in the post-trade side as well.”
Wood believes that there are things the platforms can do to facilitate service standardization through issuers to feed that information into the private banks. “That brings efficiency through the private banks and through the issuing banks as well,” he says. “But it also brings the opportunity to improve the level of service that is provided to the end customers due to the more timely notification and better information passing between the groups.”
According to Kulkarni, post-trade isn’t as simple as price quotation exchange or order done/filled message. “The homogeneity of inputs and outputs is a fundamental requirement for any multi-party connectivity automation platform,” says Kulkarni. “For post-trade, unfortunately, the factors involved are too many. However, term sheet exchange is something we see being automated soon.”
Post-trade services have been the focus of Contineo for the last year, according to Muñoz. “We would be adding post-trade services to the network at the end of this year,” he says. “This is driven by our private bank clients and it is definitely something where we see Contineo to be needed.”
Automation will continue to “absolutely necessary” to bring the level of value needed in the market, according to Muñoz. “Nowadays post-trade notifications come from the investment banks at different times and in different formats and methods of communication,” says Muñoz. “The format is fragmented, the delivery method is fragmented, the notification types are completely fragmented. Therefore, there is a need to automate this process and to establish a standard in the market not just for processing but the publishing of this information to the private banks.”
Digital Finance Media: Contineo taking structured-products platform to Europe—slowly
Contineo was established in 2015, using the technology of AG Delta (a co-investor) to electronically connect investment banks, which manufacture structured products, with the private banks that distribute said products to wealthy Asian clients.
For example, a private bank’s relationship manager (RM) might want to pitch a trading idea to a wealthy client. She can set out parameters on the Continue platform and investment banks can automatically respond with prices; these prices aren’t advertized, but the system will offer up the most competitive bids, for the RM or her client to accept or reject. Transactions of vanilla products can be packaged and sold in minutes.
“There’s no digital solution [in Europe] to streamline the business”
Contineo has been a hit thanks to its speed, its algorithms to immediately construct and price products, and its use of a common protocol (FIX, for execution) that allows multiple players to interact. The platform has allowed participating banks to cut headcount, and made it simple for both issuers and distributors to do business amid a marketplace with many counterparties.
In Asia, Contineo competes against Singapore-based FinIQ Consulting, a standalone vendor, and as a result of these various solutions, bilateral issuer-to-distributor deals for structured products are now limited to esoteric situations. The two players each have close to half the market, reckon bankers. (FinIQ did not respond to requests for comment.)
And the market is big: Munoz says the Hong Kong and Singapore market for structured products is $180 billion a year in notional contracts. He says the average transaction size on the network is $500,000, with the underlying mostly equity flow products.
Europe is a smaller market, but still attractive, at around $120 billion, Munoz says. But it throws up the same problem that Asian banks previously faced: “There’s no digital solution to streamline the business,” he told DigFin.
Hence the users have been requesting the consortium extend its services. But it’s not an apples-to-apples situation.
Asia vs. Europe
Asia’s industry involves many family offices and wealthy individuals who demand customized, bespoke products for short-term trades. Accumulators, a type of equity forward that is popular with Asian customers, can hit targets and pay out within a week. And rich Asians like to spread their trade among multiple private banks, adding to complexity of price discovery.
“Now it just takes minutes to price, quote it and trade”
Ultimately, the cost of product design and execution plus the market’s big size and confusing variety of bilateral relationships incentivized banks to invest in any multi-issuer platform, says Lemuel Lee, head of equities for Asia at JPMorgan’s private bank, in Hong Kong.
“In the past, it would take an hour, if everyone focused on it,” he said. “Now it just takes minutes to price, quote it and trade.”
But these conditions are not replicated in Europe. Structured products are designed to last three to five years. The sizes are smaller. Payout structures, and therefore compliance rules, differ. And there’s no need for banks to race to close a price before the day is out.
The competitive landscape is also more mixed, with vendors such as ITG’s RFQ-Hub, LeonTeq and Vontobel’s platform (called derinet) already serving different niches.
Munoz says private banks in Europe have expressed a desire to see Contineo operate there. “It’s not a revenue drive by us,” he said.
Bankers in Asia see the benefits their counterparts in Europe would receive, although they recognize the need may be less acute.
“It will come over time,” says Frederic Dussaux, co-head of electonic market-making and commerce at BNP Paribas’s global markets division, in Hong Kong. “Private banks [in Europe] should demand it in order to automate operations and deliver execution capabilities to their RMs.”
Organic build
But what happens in Asia often stays in Asia: for these global financial institutions, regional executives follow their own market needs, and their own incentives. And service providers like Contineo can’t leverage opinions in Asia to sway those in Europe without risking annoying its clients.
So for Contineo, the European business has to be established organically. As a consortium fintech, Contineo needs to make sure enough of its members will support the move. Some investment banks are happy with the status quo in Europe, where the environment is already competitive, and may not welcome a system that makes pricing more transparent.
“It would be a challenge if clients felt like we weren’t giving them a choice,” Munoz said. “We want them to see the long-term benefits.”
To some degree, a slower pace is natural to a consortium business model. A fintech servicing multiple financial institutions across jurisdictions faces high costs, and Munoz says it took Contineo six months before members started using it, and while longer before they began to pay.
To that end, Munoz believes some of the more enthusiastic private banks will join the European platform by the end of this year, but it may take longer to activate investment banks. But he is betting the allure of transparency, speed, efficiency and client demand will eventually win enough of them over.
http://www.digitalfinancemedia.com/blog/2017/05/24/contineo/
ABOUT CONTINEO
Contineo is the first industry supported open messaging network and community to access issuers of structured products. From best price discovery to order fulfilment, our subscribers benefit from unique data analytics through a comprehensive global network.
Contineo is proud to count the world’s leading private and investment banks as subscribers. To learn more and see a demo please visit www.contineo.link or contact info@contineo.com.hk.
Inside Market Data: Contineo Launches Data Analytics for Structured Products Community
Contineo, the industry-backed messaging network for equity- linked structured products, has launched I/O, a data analytics tool that collates and analyzes data on its existing network to provide users with insights into market activity.
I/O is a set of products for Contineo subscribers that includes proprietary analysis and anonymous market data about structured products activity over the vendor’s network.
These include firm-wide and market-wide executive dashboards that provide insight into users’ performance at an individual, team and firm level, as well as their performance relative to other firms.
Subscribers to Contineo’s network have access to basic reports, while more comprehensive enterprise reports and an API datafeed are available for an additional fee. By analyzing activity, users will be able to adjust their strategies─for example, to achieve greater insight into client relationships, or to improve pricing and market depth in response to changes in activity.
Subscribers will have access to charts and rankings on request for quote (RFQs) and request for order (RFO) activity, and aggregated views on products that are trending and selling in the market. The data is segregated by individual bank, and any potentially identifying information is removed for the market view.
Contineo’s I/O has been generating reports for subscribers since September 2016, and will launch the second version of the platform later this year. A third version is already in development, and will offer additional forward-looking features. For example, if a structured product will expire soon, I/O will provide options that the client can take, such as to either roll the product over or hold it to expiry.
The tool also generates compliance and regulatory reports, and officials say it will appeal to a range of financial institutions, from private banks and investment banks to asset managers, hedge funds, and financial technology providers serving the structured products industry, and will serve a range of applications as market participants seek to apply the never-before available information to a previously opaque market.
“Private banks have never had a trusted source for market intelligence in their business and this is key and it’s proving to be a useful tool for them, particularly on the buy side. The network is a great utility but the data helps them grow their business,” says Contineo chief executive Mark Munoz. “We are helping the buy side in terms of running their operations. It gives them more insight into their business, usage and user activity. For the sell-side, they are more interested in the market impact report, and I/O also allows them to see why they’ve missed a trade.”
Contineo has seven private banks subscribed to its network, and has seen a 20 percent increase in traffic on the network so far in January 2017 alone, officials say.
https://www.waterstechnology.com/inside-market-data/news/2480994/contineo-launches-data-analytics-for-structured-products-community
ABOUT CONTINEO
Contineo is the first industry supported, open messaging network for private banks and wealth management firms to access issuers of structured products. Together we are a community with a shared vision and purpose.
We believe that technology should be intuitive, easy to access, and available to all participants. This means creating an open messaging standard in concert with the buy-side and sell-side, and enabling access to all parties, including other certified technology vendors.
This mission is shared by our current subscribers, who recognise the importance of an open, efficient and transparent network.
Contineo rolls-out new data service for structured products
http://structuredretailproducts.com/news-story/23067/contineo-rolls-out-new-data-service-for-structured-products
ABOUT CONTINEO
Contineo is the first industry supported open messaging network and community to access issuers of structured products. From best price discovery to order fulfilment, our subscribers benefit from unique data analytics through a comprehensive global network.
Contineo is proud to count the world’s leading private and investment banks as subscribers. To learn more and see a demo please visit www.contineo.link or contact info@contineo.com.hk.
Mondo Visione- New Data Service Brings Transparency To Structured Products For The First Time - Contineo Launches Data Products To Inform Financial Service Providers And Market Participants About The Structured Product Market
“The launch of I/O represents a sizeable milestone in the evolution of the structured products space, said Contineo CEO Mark Munoz. “The data analytics and insights have never been available before and we think the applications will be really varied as market participants seek to understand this previously opaque part of the financial products landscape.”
I/O is a standalone set of products that includes proprietary analysis for Contineo subscribers, and anonymized market data. Proprietary analyses include executive dashboards at individual bank and whole-of-market level, which inform subscribers about internal performance at individual, team and firm level, as well as performance relative to other firms. The system also generates specific reports on request.
“Data confidentiality is essential for us,” Munoz highlighted. “We designed I/O so each bank’s data is protected, segregated, securely stored and remains private, and the market view is entirely anonymised.”
I/O also offers a data feed for service integration and document generation, bringing efficiencies to these processes for the first time. This offering allows for banks’ operations teams to work with the data sets directly to suit their specific internal needs. Both proprietary and market overview data can be delivered directly into user’s internal systems.
“I/O is an important step for Contineo,” said Munoz. “Having built the network and seen the growth in our volume, our next step was delivering the analytics this industry so desperately needs.”
http://www.mondovisione.com/media-and-resources/news/new-data-service-brings-transparency-to-structured-products-for-the-first-time/
ABOUT CONTINEO
Contineo is the first industry supported open messaging network and community to access issuers of structured products. From best price discovery to order fulfilment, our subscribers benefit from unique data analytics through a comprehensive global network.
Contineo is proud to count the world’s leading private and investment banks as subscribers. To learn more and see a demo please visit www.contineo.link or contact info@contineo.com.hk.