What is the rationale of launching Wematch?
The rationale is threefold. The securities financing industry has been investing quite a lot on post trade and on connectivity. In a way, it makes this industry quite unique in the financial landscape and the successes of companies focusing on post-trade services or the level of automation and connectivity offered today by triparty agents is a good indicator of how much this industry has invested
in post trade.
There is however a very significant space in developing further the trading processes, which are still quite manual and heavy in some instances. Private messages, telephone, and chats are still being used when the markets are looking for more and more automation, platforms and digital connectivity.
Secondly, the regulatory landscape, which is currently impacting the securities financing market, is pushing for more transparency, more reporting, more price discovery, and best execution. Platforms can cope with all those requirements and are able to embrace current and future regulatory impacts.
Finally, collateral is everywhere. There is a growing need to optimise collateral positions, to come up with a fully integrated and consolidated view on collateral assets and requirements, and the ability to move collateral on a cross-product and cross-depo basis is critical and will be more and more required.
What were the different development phases of the platform?
The platform has been launched initially in February 2017 with total return swaps (TRS) only on European equities. The traction has been immediate on both interests posted in Wematch and flows generated through the platform.
We launched the v2 in September 2017 with securities lending and repo, together with a strong campaign to onboard more clients and to balance more supply with the existing and growing demand. In November, we have decided to extend our coverage hours in order to onboard users in Asia Pacific and we have settled our first trades on Japanese Yen equities.
November saw the launch of the equity derivatives products, with a first batch dedicated to exotic products. As of December 2017, we have onboarded 25 clients for a total of 140 users, and the platform is receiving around 2,000 interests daily for $35 billion cumulative value.
What is the regulatory framework of Wematch?
Wematch is embedded within Kyte’s OTF, and will be fully compliant with the second Markets in Financial Instruments Directive. At the start of 2018, Kyte Broking intends to operate an OTF trading venue. As such, any non-equity over-the-counter products and instruments traded multilaterally and deemed in-scope for being traded on a trading venue will be introduced to the Kyte OTF trading venue. To this end, such products and instruments are subject to various regulatory reporting requirements (specifically RTS2, RTS22, RTS23 RTS27 and RTS28) of which the OTF trading venue operator is responsible. If the product or instrument dealt with by Kyte is deemed in-scope for the OTF, the broker will communicate to the client. In cases where the execution arrangement is a Name Give-up, the clients involved in the transaction will be responsible for fulfilling the transaction reporting requirement RTS22-t.
In the case of Wematch, depending upon the trading arrangements, TRSs may be subject to be traded on the OTF trading venue. Kyte will fulfil regulatory requirements therein as outlined above. Repos and Securities Lending products are out-of-scope for the OTF. With respect to these products, Kyte will meet its obligation to produce Best Execution reporting requirements (RTS28).
Should the regulation evolve with regards to those products (including additional reporting requirements), the framework is adaptable and will be able to comply with these without delay.
What is your roadmap for the coming months?
We are currently working on multiple initiatives. We believe the model and the workflow we have been developing can be adapted for any specific / internal requirement, and we will keep on rolling out our horizontal development strategy.
We will deliver new asset classes, new products, and potentially new platforms according to the needs of our clients and of the market.
The other area of development is around connectivity. Wematch needs to be as connected as possible. We have developed a very powerful application programming interface (API) library and the objective is to use it intensively to enhance automation and connectivity with our clients, with external providers, and with market infrastructures.
We will strengthen as well our API library to cope with the specificities of the lenders’ community and ensure we can create value in the current dealing process.
Finally, we expect to strengthen our market data section with as accurate and granular as possible levels on pre-trade data. The platform can bring value on the trading process and provide the users with precise benchmarking tools allowing for an optimised dealing process and data collection.
We will continue as well to develop smart dealing features with suggested matches and suggested structures to maximise our users’ time and to allow them to focus on added-value processes. In terms of geographical expansion we expect to be live in the US by Q2 2018.