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Utility Player: FIS’ John Avery Sees the Derivatives Utility as a Driver of Innovation

In June of 2015, SunGard, now part of FIS Global, launched its post-trade derivatives utility, which aims to standardize back and middle office operations and technology, with Barclays as its first customer. According to FIS’ John Avery, it is not about commoditization so much as specialization.

“If we look at the clearing market as an example, firms are really there to provide their balance sheet and client service, and use that as a differentiation tool,” says Avery. “What we don’t see is a need for those same firms to maintain a book of proprietary technology.”

In other words, banks and futures commission merchants should concentrate on differentiation through service, cost, and other customer touch points, and leave standardized, replicated functions in the hands of a vendor. This will allow the bank or FCM to innovate from the business level, and allow the vendor to innovate at the fintech level.  

From cybersecurity and mobile payments to blockchain and distributed ledgers, fintech is all the rage these days, but fintech is more than just a buzzword. Fintech is innovation, driving process improvement, driving innovation in a positive feedback loop. Avery sees the derivatives utility as a perfect example of how a fintech offering can be a win-win for vendors and clients.

“The fintech moniker is something that highlights that vendors are a positive force and a positive driver of innovation,” he says.

Once the utility is fully functional, according to Avery, 70-75 percent of the back and middle office operations and technology functions could be steered to the utility, which would drive down costs considerably. He also sees the utility as helping lower the cost of change due to new regulations or changing market dynamics. “It reduces the economic costs, the risks, as well as the time to market.”

It doesn’t get more utilitarian than that.

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Roxas is an editor and video production assistant with John Lothian News and John Lothian Productions. He is also a contributor to MarketsWiki.