Pirum recently launched several partnership schemes. Do you see this trend gaining momentum in today’s environment?
Strategic alignment is critical for future growth and for the evolution of the market. Aversion to any infrastructural change and limited technology resources prohibit participants from immediately benefiting from new product offerings. By utilising Pirum’s central hub structure, participants technically outsource a portion of their development work, reducing overall implementation timelines. Customers further benefit from the ‘network’ effect where one connection, via a single portal, enables connectivity into all partnership structures developed by Pirum. Flexibility, nimbleness, and ‘light touch’ implementation are key differentials that will separate successful models from those that require individual pipe structures or highly customised development. The latter models will ultimately struggle in today’s present environment of cost reductions and technology resource restraints.
What has the reaction in the market towards Pirum’s partnership offerings?
Our new Tri-party RQV Automation solution with both BNY Mellon and J.P. Morgan has been extremely well received. We are already calculating over $12 billion and submitting for more than 250 accounts to the agents. The ability to standardise participants’ daily RQV operational processes using a single set of screens that are applicable to all counterparties and across both triparty providers via a single portal has proven successful with our participants, delivering immediate benefits.
Pirum’s CCP Gateway solution with Eurex Clearing has successfully launched its trial phase in November 2012. The Lender CCP has really focused on adaptability and education. Pirum has worked closely with Eurex Clearing in the development of delivering an offering that the market would find acceptable. Education has been critical, as Eurex Clearing’s model has been structured to accommodate present market practices, for both sides of the transaction, with minimal impact on day-to-day processing, while adding a new dynamic to the securities lending market. We now feel that we have a committed group of early adopters that are aligned to commence trading in the near future.
What are the realised benefits that your customers receive through these strategic alliances?
Pirum users that are participating in the Tri-party RQV service have the benefit of a unique product offering that automatically calculates, reconciles, agrees and submits RQVs across all counterparties whether they are Pirum participants or not. The new service improves the intraday visibility of proposed RQVs, facilitating much simpler and timelier dispute resolution among market participants. It also provides a single unified process for operations teams to use when agreeing and communicating RQVs and to ensure that the correct value of collateral is allocated. Additional benefits include RQV calculations that are performed in real-time, which includes pre-pays and intraday return movements using each participant’s custom built rules to match internal valuation models, as well as a fully configurable setup for currencies, margins deadlines and a one-to-many account structure at escrow level.
Immediate benefits received for customers utilising Pirum’s CCP Gateway are capital and RWA (risk weighted assets) relief. This relief is realised when agreed bilateral trades are novated to Eurex Clearing. The minimisation of counterparty risk and credit exposure for individual market participants, while providing a considerable reduction in systemic risk for the market in general, are representations of the larger benefits received by our market.
Further advantages gained for clients via Pirum’s CCP Gateway solution are achieved by the ‘network’ effect requiring no technical interface with Eurex Clearing, which saves valuable and scarce IT resources. Pirum’s API interface and Eurex Clearing’s bilateral trade capabilities require no external trading platform and they provide full lifecycle management of open trades in real-time. This alliance means that clients do not need to support two separate technology infrastructures to accommodate both bilateral and centrally cleared business. With Pirum’s CCP Gateway, it’s plug and play.
From a technology point of view, where do you see the evolution of the market moving towards?
Regulatory reforms and corporate consolidation will further push the market towards automated solutions and standardisation. Buy-side clients are already beginning to realise that high quality automated post-trade solutions are required to manage existing business lines and secure future growth. Further implementation of real-time functionality across all service offerings will be critical for the evolution of our market. The finance industry in general has been consuming real-time applications for many if not all pre- and post-trade activities. Real-time capability has now become a standardised requirement when strategically aligning with any partnership structure. Firms will continue to widen the net looking for vendors that can bring ‘value add’ real-time reconciliation, exception processing management, overall process standardisation and asset servicing solutions to an ever-changing market place.
How does Pirum align itself with that evolution?
Pirum will continue to work with our clients to develop and implement innovative solutions for today’s marketplace. As the market continues to constrict, there will be a heightened demand for real-time applications that mitigate risk, provide better controls and bring overall operational efficiency to their institutions via a single portal access route. Organisations will further look to embed these practices across all business lines and we believe that we are strategically placed to partner with industry leaders to deliver solutions that the buy and sell sides will embrace with open arms.
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