IBS Journal April 2015
Sungard to introduce post-trade utility with Barclays
Sungard has announced plans to launch a new utility for the processing of the post- trade leg of listed and over-the-counter (OTC) derivatives transactions. The new utility is being brought to market in col- laboration with Barclays, which is the first user and will outsource all of its post-trade activities to Sungard by Q2 this year. In addition, a number of Barclays staff will transfer to Sungard as part of the trans- action to make up the operations team of the utility. Brian Traquair, executive vice-presi-
dent, Sungard Financial Systems, explains that the drivers for mutualisation in the industry stem from increasing cost pres- sure in a range of areas. ‘One is increased regulation (such as EMIR and Dodd-Frank), second is that interest rates are quite low, which reduces the income for firms, and finally there is simply a drive to do things more efficiently on the clearing side of derivatives transactions,’ he says. Barclays represented a logical first
taker, explains Traquair, as it is already a long-standing customer of the vendor in this space. ‘Barclays looked at the industry and reached the same conclusion that it
couldn’t get to the price points and cost structures it needed to get to without doing something quite dramatic,’ he says. Barclays CEO, Antony Jenkins, has been actively trying to slash costs in the invest- ment arm of the bank, with several strat- egies in implementation in an attempt to reduce its heavy losses. The utility is underpinned by four
main Sungard products. At the back-end, the vendor’s GMI and Ubix platforms will be used, with the Clearvision tool as the middleware layer, and finally Intellimatch for reconciliations. Traquair explains that a number of prospective users (Sungard is targeting around 100 firms as poten- tial adopters) in this space are already Sungard customers, so there is a relative- ly simple transition to outsource these functions. ‘Quite often when you go to a customer and say, “I have got this great idea”, they have to change their software platform. With the utility they can consider using that software platform but we host and manage it for them,’ he says. Sungard will provide all of what
Traquair calls the ‘street side’ of transac- tions, i.e. the part which is not customer
IN BRIEF
Online banking start-up in the UK, Charter Savings Bank, has officially launched. The bank is owned by Charter Court Financial Services Ltd (CCFS) and focuses on attracting deposits, while CCFS’s two other businesses, Precise Mortgages and Exact Mortgage Experts, specialise in niche mortgages and lending. Charter Savings Bank is underpinned by the Ambit Treasury Management (for-
merly Quantum) system supplied by Sungard. Andrew Woods, executive vice- president, treasury at the vendor, says that bank needed a system that could be deployed in a short timeframe, as CCFS wanted to demonstrate its readiness from a technology point of view to the regulator, Prudential Regulatory Authority (PRA), by H1 2014. Another key requirement was the solution’s ‘strong treasury market per- spective’, i.e. its ability to support regulatory reporting and risk management in addi- tion to the standard back office functions, which is vital in the pursuit of a banking licence, Woods comments. Ambit Treasury Management covers front-to-back office operations at Charter
Savings Bank, and integrates with the internal GL application. The bank uses its own development for the customer-facing front-end. Ambit Treasury Management is a well-established system in the UK, with 30+
users, the majority of which are building societies (Ipswich, Leeds, Newcastle and Nationwide among them). It is also used by domestic banks, such as Lloyds Bank, Aldermore Bank and Sainsbury’s Bank, and by the UK operations of foreign banks, e.g. Jordan Ahli Bank.
facing. ‘We discovered that about 70 per cent of what our customers were doing was not differentiating at all, so we felt that that part of the operations could be processed in the same way by all the customers,’ he says. Functions support- ed include preparing the fee and rebate statements for clients, margin calcula- tions, reconciliations, transmission of data to and from exchanges, depositories and clearing houses, holding all the books of record, position management and risk assessments. Traquair hopes that once Barclays has
gone live, Sungard will be able to add one user per quarter and migrate them to the utility within three months. This will gen- erate some confidence in the utility mod- el, he anticipates, and encourage further adoption. There will be operations based in three continents, he adds, so the scope will be global, but there may be further reliance on technical expertise from cus- tomers. ‘As we build out the utility, the first two or three customers will proba- bly bring some additional expertise in, it could be in different geographies or func- tions, until the utility is fully staffed.’ After many years of talk about utili-
ties, and some high profile failures such as the Arcordia initiative from JP Morgan, Sungard is now the second vendor in the last year to take the leap and roll out a solution. Its domestic rival, FIS, partnered with Crédit Agricole Corporate and Invest- ment Bank (CA-CIB) last year to develop a utility based on a number of technolo- gy platforms, such as Murex and Calyp- so. Traquair feels that previous industry efforts have fallen foul of over-complica- tion. ‘The approach taken when compa- nies have tried to set up utilities is that they try to get as many people involved as possible,’ he says. ‘That’s a very diffi- cult thing to do.’ Instead, Sungard feels that having control of its own technology, backed up by its expertise (Traquair says Sungard has operated in this market for nearly 30 years) and backing of its part- ners makes a more robust proposition. ‘We chose, because of our position, to get one client bought in, agreed and live, and we treated that as a commercial process. We are not going to be regulated, the compli- ance stays with the clients,’ he stresses.
12 © IBS Intelligence 2015
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