CCPs – a Crucial Cog in the Value Chain
Despite the extraordinary increase in trading volumes and margin calls during the peak of the pandemic, CCPs – including SIX x-clear – proved resilient and many are now looking for ways to improve their operating models post-COVID-19. In order to enhance operational resiliency and mitigate market-wide risks moving forward, Brendon Bambury, Head International Client Relations and Sales at SIX, said FMIs including CCPs – along with banks and brokers – needed to collaborate more closely.
Bambury also told TNF that various regulatory and capital drivers were likely to drive more OTC trades into a centralized clearing environment. He noted SIX’s recent acquisition of BME Group in Spain had enabled it to widen the scope of products and instruments that it was now able to clear. On CCP interoperability – namely cross-border linkages between two or more CCPs – Bambury argued the model helped streamline costs for clearing members, owing to the much reduced loss absorption obligations. In addition to giving clearing members further netting benefits – facilitating greater efficiencies and innovation – Bambury told the TNF audience that interoperability also provided CCP users with greater choice in where they clear their trades. Overall, many financial institutions now acknowledge that CCP interoperability plays an integral role in helping to shore up market liquidity.
A Provider That Is a Technology Leader
Stephan Hänseler, Head SIX SIS, the CSD (central securities depository), highlighted the group had a strong record of adopting new technologies, a trend that has been accelerated by the pandemic. In addition to tools such as APIs (application programming interfaces) and RPA (robotic process automation), Hänseler said the company was leveraging cloud-based solutions as a means by which to strengthen its client data offering and reduce IT costs. While technologies – especially virtual communication platforms – have been pivotal in helping to maintain client relationships during the pandemic and lockdowns, Hänseler doubted these technologies would replace personal interactions.
SIX is also a pioneer in the DLT (distributed ledger technology) space. Hänseler said SIX is currently developing SIX Digital Exchange (SDX), a DLT-enabled market infrastructure which will support the issuance, trading, settlement and custody of digital assets. While innovation of this sort is essential if intermediaries are to future-proof themselves, Hänseler said it was equally crucial that providers continue to support traditional financial instruments in addition to nascent digital assets. This is because clients will continue to participate in traditional markets for a long time to come. “When we speak to our clients, we reassure them that we will run two parallel systems. The first will be designed to support the traditional market ecosystem, whereas the second will be entirely DLT-based,” he said.
Optimizing Tax Through Advanced Tax Services (ATS) – a Critical Enabler
Speaking during an Expo session at TNF, Marco Berger, Senior Product Manager ATS at SIX, said that an effective approach towards tax optimization can add significant basis points to performance at a time when returns are under mounting pressure. Berger continued that investors have been increasingly seeking out tax claims solutions from their providers ever since the implementation of the Automatic Exchange of Information (AEOI), an OECD-led (Organization for Economic Cooperation and Development) initiative designed to clamp down on tax evasion through enhanced financial account information sharing between the tax authorities of different countries. The maintenance of tax claims services is complex and time-consuming, and often requires people to have a high level of tax expertise. The challenge is further compounded by the ever-changing taxation regulations, which require constant monitoring together with the absence of tax harmonization across different markets.
Providers are cognizant of the tax complexities their clients are facing. Céline Forestier, Front and Marketing Manager ATS, SIX, told the TNF Expo session that the group’s Advanced Tax Reclaim service is a one-stop-shop solution capable of handling withholding tax reclaims for clients. “This allows clients – including banks and wealth managers – to benefit from reduced complexity, costs and operational risks when performing tax reclaims. In addition to supporting clients with tax optimization, the solution enables our customers to focus on delivering returns and other revenue generating activities,” she continued.
Leading the Way with Fund Services
Michael Lüthi, Head Sales & Relationship Management Switzerland at SIX SIS, provided his insights at a TNF Expo session where he outlined some of the main strategic benefits of leveraging SIX’s open architecture fund consolidator. Under this model, SIX provides clients with a centralized trading, settlement and custody solution with a single-source offering for all of their fund processing needs. Among the key advantages of SIX SIS’s open architecture fund consolidator, he continued, are that it enables clients to maximize their portfolio coverage, enhances their risk mitigation through provider diversification, and offers consolidated access to best-in-class services including distribution agreements and rebates. “By acting as an entry gate for clients’ entire business, customers will have a single partner and contact for execution and custody, harmonized processes, and a reduced operational spend,” explained Lüthi.
Working With a Best-of-Breed Provider
COVID-19 has thrust all sorts of challenges on clients, but it is also reinforcing how important it is for organizations to work with providers that embrace new technologies and can deliver a superior service. By doing so, clients will net operational benefits and synergies, enabling them to focus more of their attention instead on profit-generating activities.