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A Difference Maker: Post-trade Clearing Tech Now a Differentiator For Firms

If today’s markets are traded in milliseconds, why can’t post-trade clearing keep up?

ION is addressing that with its XTP clearing solution, a near real-time system it has quietly been rolling out since 2015. Last year the product was adopted by a handful of firms. And this year, ION is hoping to see a larger migration of customers to the new platform, which is considered a major upgrade to its Rolfe & Nolan system.

It took ION four years to build the system, creating it on top of ION’s core trading technology. The low-profile firm is stepping out a bit more with XTP now off the ground and fully integrated with its front- and middle-office technology. It’s been a steady rebuild under Keith Todd, who stepped down as executive chairman, agency trading and processing at ION last month.  Now it is up to Silvio Oliviero, who now serves as CEO of agency trading and processing at ION, to carry the ball forward on XTP and its other products.

The XTP rollout comes as competition is heating up in the post-trade sector from such rivals as Revendex and Cinnober. The latter is creating a new firm to offer its own system. And FIS, owner of the platform once known as Sungard GMI, has its own real-time post-trade platform called Stream GMI.  (See our previous stories here and here.)

The renewed interest in post-trade technology is driven in large part by the changing regulatory and reporting structure. Firms are also looking for more clarity on their books by region or time zone as well as across a firm’s operations. And frankly, firms are looking for clearing and settlement in minutes, not hours overnight, when back-office staff are still examining out-trades on a line-by-line basis. These antiquated practices not only create downtimes for firms but make 24-hour trading and risk management difficult.

Oliviero believes ION has the full package of offerings to deal with this. He said it is more than just the technology. It is backing that up with the people who can help firms provide more than end-of-day accounts. It’s handling cash balances and margin, not to mention the regulatory reporting across jurisdictions. All of this is part of managing risk globally and in real time.

While he admits that some firms have been slow to adopt the new middle-office and back-office technology, real-time back-office technology is becoming a competitive advantage.

“People will find that if they don’t have real-time technology, they won’t have the ability to capitalize on opportunities,” Oliviero said.

In other words, back office is more than a utility service; it is quickly becoming a differentiator.

 

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Kharouf is CEO of John J. Lothian & Co. and editor-in-chief of John Lothian News (JLN). He edits the John Lothian Newsletter, MarketsWiki and MarketsReformWiki.