Post-Trade Investment Continues To Rise
Brian Collings, chief executive of Torstone Technology, which provides post-trade securities and derivatives processing technology, said the trend for increased post-trade investment has continued this year as firms review their medium-term strategies after MiFID II.
Collings told Markets Media: “Last year MiFID II consumed a lot of resources. This has led industry participants to re-assess their medium-term strategy and seek more flexibility and agility.”
MiFID II went live in the European Union at the start of 2018 and the scope of the regulation, which covered multiple asset classes, consumed budgets and effort as the industry prepared to be ready in time.
“The trend for increased post-trade investment has continued this year,” added Collings. “Activity in Asia is also picking up as firms look to consolidate across the region.”
He continued that total cost of ownership continues to impact firms’ operational processes, and there will be more margin pressure, which may lead to further consolidation. For example, last month Shore Capital acquired rival Stockdale Securities to create London’s fourth-largest corporate broking firm.
Collings said: “Last year one client consolidated companies they had acquired across multiple asset classes. We adopted a phased approach to bringing their securities and exchange-traded derivatives processing onto one post-trade system to give a joined up view of their portfolio.”
Automation across asset classes has significantly improved according to a white paper in September last year from Torstone and Celent, a research, advisory, and consulting firm. The report said: “As more asset class trading electronifies and adopts electronic trading platforms in the front office, they will need to be complemented by automated workflows in the post-trade arena.”
Arin Ray, senior analyst at Celent and author of the paper, said in a statement: “Improving automation levels in post-trade will require modernizing back office systems with new technology based on latest standards and frameworks, and simplifying the complex patchwork of systems accrued over the years. New technology such as cloud, process automation, and engagement models such as managed services will be important levers for improving efficiency in the next phase of this journey.”
Torstone Technology said this month that it is doubling the size of its London office after growing revenue by over 50% last year from 2017. The firm said in a statement that it increased staff by more than 50% last year and signed two large European clients in the last quarter.
“We aim to continue growing through geographical expansion in Europe,” added Collings. “We are also very much looking to make progress in North America and Canada over the next three to six months.”
Torstone currently has clients in the UK, Germany, the Netherlands and Norway, and is looking to expand further into Scandinavia as well as France, Belgium, Spain, Italy, Portugal, Luxembourg and Switzerland.
Collings said the expansion strategy also includes focusing on brokers who trade futures and options. “Our platform has several securities modules and so can provide a unified view across asset classes which is an attractive option,” he added.
In addition the platform provides transactional data. “We are also in the Big Data space and can combine structured and unstructured data to provide analysis back to the front office,” Collings said.
Last year was very busy for mergers and acquisitions of financial technology providers and 2019 is set to maintain the same pace according to consultancy Aite Group.
For example, SS&C Technologies acquired Eze Software; custodian and asset manager State Street Global purchased Charles River Development, the front and middle office platform; and Nasdaq has completed its deal to buy Sweden’s Cinnober Financial Technology.
Consultancy Aite Group’s report, Top 10 Trends in Institutional Securities & Investments, 2019: More M&A Ahead, has predicted that that this year is likely be just as busy as 2018 for technology acquisitions.
Virginie O’Shea, research director at Aite, said in a webcast to discuss the report: “Custodians and market infrastructure providers want to expand into data services and and get involved in the full end-to-end trade life.”
Torstone also faces increased competition from new fintech providers.
Collings said: “There is a high barrier to entering post-trade in securities and derivatives processing and accounting. But although our company is relatively young, our product is mature.”