What is Wematch Securities Financing and what does it do?
Wematch Securities Financing has been live since February of this year. It’s essentially a digital broker making the bridge between supply and demand with a focus on increasing liquidity. The platform connects market players active in financing trades and optimises the negotiation process.
Its initial focus was on total return swaps and European equities, so quite a small niche in the financing market. Since February, the platform has grown quickly. Twelve of the top 15 banks that used to trade over the phone now use Wematch Securities Financing to input their interest in financing trades and to negotiate them. The platform has already received more than $1.5 trillion worth of interest and circa $8 billion of swaps have been confirmed. We are very happy with the volumes so far and the platform has received a very warm welcome from banks and lenders alike.
What’s the next step in the development of Wematch Securities Financing?
The next stage of the rollout of Wematch Securities Financing is to enrich the product set, which begins this month. We are adding securities lending and repo to the mix, in addition to total return swaps. We will also expand the asset classes available on Wematch Securities Financing. On top of European equities, we are expanding to fixed income securities and the platform will manage US and Asian assets.
When Wematch Securities Financing is fully operational and live this month, we will be able to offer securities lending, repo and total return swaps on a global scale. We are excited about this launch because it will offer users a lot of options.
What are Wematch Securities Financing’s unique selling points?
Securities finance has entered a new era. There is an ongoing demand for best execution, timestamping and pre- and post-trade reporting in securities finance, making the arrival of a platform such as Wematch Securities Financing quite timely.
The obvious example is the second Markets in Financial Instruments Directive (MiFID II), whose best execution requirements, while unclear in their application to securities financing transactions, are strong and present in everyone’s minds.
Wematch Securities Financing is going to operate in compliance with MiFID II from the January 2018 implementation deadline so that we can give peace of mind as far as that regulation is concerned. Wematch Securities Financing will operate as an organised trading facility.
Day-to-day trading is where Wematch Securities Financing shines. The overall objective is to improve the negotiation process. Wematch Securities Financing is using the latest machine learning and artificial intelligence technologies available. Our algorithmic team has developed a patent pending system that focuses on optimising liquidity and market efficiency.
We want to take the platform’s insight into users from its simplest—it knows who they are, what they do and what is of interest to them—to the much more complex. For example, if there is movement on a currency, Wematch Securities Financing can recommend adjusting the user’s interest, because that’s the way the market is going to go. With the right algorithms and analytics, Wematch Securities Financing is able to proactively suggest matches to users.
Users of Wematch Securities Financing will also benefit from the large flexibility of our system matching on a cross-product basis. When we launch securities lending and repo, if a user wishes to conduct a total return swaps trade on one side and another user on the opposite side is interested in a repo trade, Wematch Securities Financing will be able to show that match. Then, if those users are able to switch products, they can enter into negotiations.
Are you looking at partnerships?
Through our partnership with Pirum, mutual clients can execute trades on Wematch Securities Financing and manage their post-trade on Pirum, which also boasts downstream connectivity to infrastructure providers such as triparty agents and central counterparties.
Pirum will also enable Wematch Securities Financing clients to comply with transaction reporting obligations (for example, the Securities Financing Transactions Regulation) via Pirum’s existing partnership with IHS Markit.
The partnership with Pirum is key for Wematch Securities Financing because it ensures that we have full integration. It is extremely important that we help to create, wherever possible, a fully automated process. We do not want to create additional operational risks, which will ultimately result in extra costs.
We are also talking to other market participants, such as IT providers, other post-trade services companies, and central counterparties.
What do you want to achieve with the Wematch Securities Financing platform?
What we want to achieve and maintain with the launch in September is the Wematch Securities Financing client experience.
Today, when clients want to access the platform or are asking for new features, they get what they need very quickly.
We have the resources to understand, integrate, develop, test and deliver within a very short period of time. We want to maintain this level of service. This means that we need to restrict the number of clients we work with.
Our aim is not to provide end-to-end scope with thousands of users onboard. The target is more to offer the best experience to hundreds or users. Wematch Securities Financing is at its best when it’s tailor-made and delivered to users quickly. Our aim to maintain that level of customer experience.