SLIB
AST talks to Bernard Tardy and Patrick Ciaravino of SLIB, who see a challenging European post-trade landscape
Could you give a general overview of SLIB and your roles within the company?
Bernard Tardy: SLIB was created nearly 25 years ago. We are originally a French company, and since our inception we were always dedicated to the area of financial solutions and more precisely, software solutions for securities management, and the processing of securities post trade. We have approximately 50 customers in Europe, the majority of which are in Paris and London, but we also have customers in Portugal, the Netherlands and are about to have our first customers in Asia.
We have just over 100 members of staff, and we design our software solutions ourselves. We have two main locations in Paris and Lyon, and we also have a third office in Brussels, and a small office that is currently being opened in London.
I’m in charge of the sales and marketing department, and Patrick Ciaravino is responsible for our presales/business consultant team. His role involves liaising with the customers that we have, and helping our customers figure out what they need, alongside what they already have.
I’ve been working for SLIB for five years, and prior to that I held several positions in software sales in the financial services area.
Patrick Ciaravino: I’ve been working for SLIB for 20 years, and before that I was head of the back office for a broker in France.
How do you see the European post-trade landscape developing in the future?
Tardy: SLIB has always been very focused on certain activities in the securities processing business, and clearing and settlement is at our very core; it’s where we have gained the most expertise and experience. As you can imagine, everything is linked to post-trade.
We are watching upcoming changes such as T2S very closely and we are preparing our offerings to help our customers. We are about to publish a whitepaper, which is a result of a survey that we conducted with 15 large banking and financial institutions in Europe, looking at their readiness for T2S and also how they see the new challenges that are linked to T2S. One of the things that we learned is that the people see a real need for intraday liquidity management.
Ciaravino: From our perspective, regarding the history of the back office in Europe, back office activity was incredibly local 10 years ago. The revolution in the last 10 years occurred around more and more cross-border activity.
Our view is that T2S is a logical evolution of global clearing and settlement activity. Due to this, we are ready to implement and make changes to our own settlement solutions.
In terms of liquidity, we must separate stocks and cash. In cash, the big change in the last ten years was the euro changeover.
Regarding stocks, the same stock could be settled against payment in the local central securities depository (CSD), or in international depositories such as Euroclear Bank and Clearstream Banking Luxembourg. Tomorrow, with T2S, the same security will take different routes with different CSDs thanks to T2S. The liquidity will normally increase, and as more stock is brought, more money will come in.
Tardy: Our survey showed that all financial institutions are going to take advantage of the new opportunities that will come out of T2S, and they will face the new challenge of managing intra-day liquidity that they currently measure at the end of the day.
On our side, we have been offering a multi-market settlement engine for years, so we are very strong in the multi-market area.
We have also created a forecast of managing cash generated by securities in our modules, so our intention is to come to the market with tools that our customers can use to optimise liquidity.
Are those who complain about changes in the landscape more concerned about private gain at the expense of stability?
Tardy: From what we have learned, nobody complains, because they are aware that T2S forces the rules to evolve, and that the value chain is going to change. They are all thinking about ways to increase their own value. We don’t meet people complaining about challenges—we meet people who think that they must anticipate and adapt.
Who are some of your competitors in the clearing market, and how are your services unique to theirs’?
Ciaravino: In relation to central counterparties (CCPs), we see two main activities. Firstly, there is risk management, which is about a CCP monitoring and recalculating margin calls.
One of our solutions is able to calculate the margin call of clients by replicating the algorithm of CCPs, or using the algorithm of the bank. The second activity is market settlement management, which is an area where we are also very strong.
Regarding competitors, I think our main strength is our ability to make the link between clearing and settlement. After receiving information from a CCP, we are able to monitor all settlement information, from the beginning to the bagging of the settlement.
Tardy: As you can imagine, all of the big players are linked to CCPs through clearing, but our added value is that we do not just link with a CCP from a technical viewpoint and process the basics, as most CCPs do that already. What we bring to the table is added valued around the messages that they receive. We enable them to link settlement on one side and use information that they receive to calculate risk exposure and compute margin calls on the other.
We do more of an addition to what banks have already implemented. That’s the reason why our customers in the clearing area include five of the biggest global clearing members.
What is your relationship with LCH.Clearnet when it comes to clearing?
Ciaravino: We’ve been working with LCH.Clearnet for a long time. We are following LCH.Clearnet in Belgium, the Netherlands and Portugal to offer our services to clear in each country.
Tardy: We happen to be the market pilot for the LCH.Clearnet offering. Even two years ago, when they changed their connectivity infrastructure, they asked if we could be the pilot so that we could help on behalf of customers. We are used to being the pilot for any new announcements that they propose.
Who are some of your typical custodial clients, and what services are they demanding at the moment?
Tardy: From our side, we can see two different areas in custody. One is the needs of broker dealers and for players that are acting on markets (intermediation), which are using our solutions for clearing and settlements a lot. We usually also offer them position keeping and accounts keeping to manage their relationships with CSDs. In addition to this, we have developed a special set of solutions for French custodians. We can offer them comprehensive coverage of retail custody in addition to what we previously provided, encompassing post trade plus account keeping with all the tax aspects of France.
How would you describe the custody climate in France?
Ciaravino: We are told that there are two main choices for financial institutions in this area; to subscribe to a global provider service and then have global facilities, or continue to be independent as some local custodians are in France, which will ask for tailor-made services. Those tend to be broader than just custody activity, but they cover the whole value chain.
If we are talking about clients that are based outside of France, we cover managing their positions from an accounting perspective and performing reconciliation with the positions that they have with a particular CSD. The same set-up will exist in France, when considering the top five or top 10 broker dealers.
The market seems to be divided into two parts: private banks that are dedicated to wealth management, and on the other hand, retail custody, with a dominant portion of their clients using their services via the internet. The first remains traditional, and the latter is increasingly automated.
We serve large online brokers, with one running more than 100,000 customers. For them, we handle the totality of their retail activity, managing the full value chain from the order trail down to the portfolio reporting and taxation.
What’s the biggest concern for SLIB’s broker/dealer clients?
Tardy: Automating middle-office processes (allocation, confirmation, preparation of settlement instructions) and post-trade more globally as this is where productivity gains remain to be accomplished, together with risk mitigation. The trend, from what we can see, is with pressure that is being applied to reduce of T+3 down to T+2 (this is especially true with T2S).
There needs to be more efficiency to optimise post-trade activity. This is why we have invested in providing a new state of the art middle-office broker solution, especially designed to gain in reactivity.
