Information Mosaic
Forget processing—it’s the underlying information from handling trades and corporate actions that hold the greatest value, says John Byrne of Information Mosaic
Could you describe the makeup of your business?
We see our business growing in two dimensions. We do post-trade processing automation software and also post-trade predictive analytics. As a company, we started out developing a multi-entity global securities processing platform designed to work in multiple time zones and markets. That started in the late 1990s, which at the time was very new and interesting. We were probably one of the first people to work with SWIFT on corporate actions messaging, which has been around for the last 12 years or so. In 2006, we put all our applications onto what people call ‘the cloud’ today. In the same year, we also received SAS 70 parts 1 and 2 certification, which is what you need if you’re going to run secure applications in a hosted environment.
Our client base today is made up of larger buy-side firms, and custodians on the settlement side. We are global with offices in London, Dublin, New York, Melbourne, New Delhi, Singapore and Kuala Lumpur.
You are a regular feature at industry events—what has the sentiment been like at these forums?
At SIBOS last year, for instance, it seemed to be quite a subdued mood. You tended to hear reiterations of the fact that people don’t see price levels really recovering in our industry and asset levels growing from where they’re currently at. People particularly on the asset servicing side of the business are asking how on earth they are going to make money in the long term, especially with the increasing costs on the regulatory side. This year we are seeing a more positive outlook alongside stronger economics in some sectors and regions.
What are some recent projects the firm has been working on?
Over the last 15 months, we have been working on a project that we’re very excited about called IMValue. When we built our platforms back in 1998 and 1999, we used component-based technology, designing it around our data and database in such a way that we future-proofed how we actually stored information on transactions. If you look at the Markets in Financial Instruments Directive, for example, and the drive towards increased transparency for transactions and increased information around transactions, we’ve been able to do that all along. For others it is causing disturbance, as they have to go back and store things that were never stored in the first place, which is very disruptive to systems. We designed our systems so they would do that from the very beginning.
Over the last 18-month period, there’s been another revolution in technology driven from Web 2.0. Web 2.0 is doing what the internet always said it would do in the dotcom era, in that it is storing and using a lot of informational attributes that it’s getting on users, and serving things up to them. While a many of those technologies have been around for some time, it undoubtedly crystallised with the advent of Web 2.0. The second thing is that there’s been a boom on the retail internet side based on analytics. What we’ve done is taken proven analytics technologies and we’re applying them to the wealth of data in the post-trade environment.
How are you applying this to the custody arena?
To give an example, if we’re running a corporate actions application for a global custodian, there might be 800 users, of which 300 would be involved in the processing globally, all over the world. In addition, there would be 500 users that would have various oversight activities or monitoring activities that would look at the application. If you look at the newer analytics applications, there will be thousands of users, of which some will be on the regulatory side wanting to see what is happening in terms of post-trade risk. Others are just going to be on the general business side. Additionally, you’re going to have lots more post-trade information pushed out to clients, because they want to see more depth and transparency.
How will this change the value of services?
If you look at the systems that have been built to do processing, what is valuable going forward isn’t necessarily going to be processing—it’s going to be the underlying information that people are getting from processing lots of trades and corporate actions. Talking to those in the post-trade industry, the reason that they’re subdued is because the marketplace is demanding huge efficiency benefits, and we’re not talking about 10 percent improvements any more.
Portfolio managers want far higher quality and timely information, as well as increased functionality in terms of pre- and post-decision analysis. In addition, those who are just looking at getting their trades settled with their custodians want much higher STP rates and won’t tolerate failed trades.
The problem in post-trade is that even though people have service level agreements, quality is neither being defined nor measured. Through our IMValue service we benchmark clients on quality, efficiency and risk, recommend improvements and provide the tools for ongoing monitoring.
How will risk come into this?
We are seeing an increased demand to see risk weighted processing, and were first to market with workflow-based applications. The thing about workflow applications is that, for example, if you are running corporate actions globally, it tells you every single corporate action that you have to process. It arranges all of these tasks—some of which are automated, and some not. The only challenge with this is that it gives every task equal time and priority, but some of these tasks are in fact very routine and low-risk. The second thing we want to do is quantify risk—if there are 1100 tasks to get through in one day, people want to know what are the top-five riskiest. What we’re trying to do with the analytics is two things: come up with key performance indicators (KPIs) and benchmarks looking at the key efficiency parameters, and then measuring everything that the organisation is doing against those; and we repeat the same exercise on the risk side using key risk indicators (KRIs).
We spent a lot of time coming up with a KPI and KRI set, and are rolling out a platform to capture risk, and predicting what the value of the consequences are, if something goes wrong.
The consequences for getting it wrong are complicated in this new environment, and that is what has to be calculated.
Where are you at currently with the new solution?
We have been rolling out IMValue with some of our current clients and working very closely with them to create individual KPIs and KRIs. They have been very impressed by it.
We are leading the way in post-trade analytics as we recognise there is a huge appetite in the post-trade space for this. What we are finding is that because there is so much valuable information in the post-trade area, the best source for information for an entire bank ends up in the post-trade space—it’s relevant to the whole business.
I think there is a greater awareness that the informational assets are much more valuable than the underlying processing business. Custodians see their business is going to be in information and value-added analytics—rather than necessarily processing.
