Changing the menu

Changingthemenu

Ian Manocha, CEO of Gresham Technologies plc, on why automating data management is fundamental to reducing risk and improving customer experience

“Moving to the Cloud doesn’t necessarily unravel all the spaghetti – it moves it from one bowl to another.”

As an illustration of the tangle of complexity involved in executing the trading of assets today, Ian Manocha’s analogy is a compelling one. The CEO of financial markets software group Gresham Technologies plc (Gresham) makes clear that it’s having a capable data management system that’s key – not whether it sits on the Cloud or on premise.

Legacy software and manual processes are now hugely outpaced in an industry faced with new asset classes, higher trade volumes from retail customers, globalisation, ongoing regulatory changes and richer datasets. Which is why Gresham provides offerings such as Control, a data solution that simplifies tasks with end-to-end automation, and artificially intelligent reconciliation matching.

Manocha says: “The simple process of doing a trade in the front office creates one hell of a mess at the middle and back offices where they’re working with counterparties and reporting to regulators.

“In a global investment bank, one trade ripples through hundreds of systems and processes and is written off to various databases before it ultimately settles. That spaghetti is messy and lots of errors get made – for a bank that’s risk, but for the consumer it is just utter frustration. So, Gresham’s software fixes the problems – in flight, as it’s all going on.”

An explosion in trading volumes from small investors via smartphone trading apps, encouraged by the emergence of meme stocks such as GameStop during the pandemic, is one reason why institutions need to break their reliance on manual reconciliation.

Figures from Bloomberg Intelligence reveal small investors’ share of US equities trading by volume is approaching 25 per cent, compared to between 10 and 15 per cent a decade ago. But in the Far East, a survey by the World Federation of Exchanges found that, on average, around 60 per cent of volume exchanges handled was generated by the small investor, rising to 80 per cent for some exchanges.

Pressure is further increased by the emergence of new asset classes, such as cryptocurrencies, and capital markets firms diversifying after years of focussing on just one or a handful of sectors.

Without a managed services model, institutions risk spending huge sums on staff to verify trades and at a time where a lack of personnel has already created an ultra-competitive hiring environment, says Manocha.

The industry is moving in the US, most likely, to T+1 and that compression of the post-trade cycle will need another generation of massive scalable reconciliation and control solutions

“When things get stressed, such as during the COVID period, data quality reduces and banks have more to fix at the back end,” he adds. “Often that means they have hundreds, and in some cases, thousands of people in some offshore centre who are trying to work out what went wrong and fix it.

“Therefore, if you can make even a tiny improvement in the proportion of automation of matching and straight-through processing, that makes a huge difference. Some of our clients process several hundred million transactions through our technology every day. Data is coming in, in some cases, from hundreds of different systems, external and internal.

“For big global banks, sometimes the regulatory complexity and security issues mean reconciliation on premise is faster. That’s not necessarily where they want to be, but it solves problems in a reliable way.”

In May, Gresham announced B2B payments firm Banking Circle had adopted its Control solution via a Cloud-based managed service for its cash reconciliation.

And in September, fund and investment manager WCM Investment Management said that since starting to use Gresham’s managed services in 2019, it had more than tripled its assets under management, from $30billion to $107billion by the end of 2021. Simultaneously, it had slashed reconciliation time by two-thirds.

Faster reconciliation will be crucial to the industry halving the post-trade window from two days to a day or T+1.

Manocha says: “The industry is moving in the US, most likely, to T+1 and that compression of the post-trade cycle will need another generation of massive scalable reconciliation and control solutions. We’re way ahead of the curve on that because we invest.

“We have 70 developers working on the software, which is more than any other player in this space. We’ve 270 customers and they constantly ask ‘hey, what about this?’

“So our goal is to build the team, build the tech, listen to what customers are saying and then work with them, jointly, to develop what the industry needs.”