A French bank subsidiary and a U.S. financial technology company join forces to offer a post-trade multi-asset class operating model.
BNP Paribas Securities Services has partnered with Calypso Technology to provide global, sell-side institutions with a post-trade processing solution that encompasses clearing, custody, and middle- and back-office services.
The BNP group is a multi-asset servicing specialist that is a wholly owned subsidiary of the BNP Paribas Group. The subsidiary’s multi-asset class operating model, which covers equities, fixed income, cash equivalents, and commodity derivatives, will combine Calypso’s front-to-back architecture with BNP Paribas’s existing post-trade servicing capabilities.
Pascal Xatart, CEO, Calypso Technology
The gamut of services will range from clearing and custody support to middle office functions such as confirmations, fees and commission management, and regulatory reporting. Back-office operations of static data management, accounting, regulatory reporting, asset servicing, and standing settlement instructions (SSIs) are also on the menu.
The main driver behind the united effort is the continuing onslaught of regulation that is forcing investment banks to upgrade legacy platforms as well as implement new systems to meet the tighter regimes.
Since the Great Recession, there has been a steady stream of regulation with the most recent being the European Infrastructure Market Regulation (EMIR) and Target2Securities (T2S). The load will continue to be heavy next year for global firms with the Securities Financing Transactions Regulation (SFTR) and MiFID II, which are set to come on force in the first quarter.
Although the reporting requirements are burdensome across the board, the SFTR is considered among the most complex as information on parties involved in a trade, principal amount, currency, collateral assets, repurchase (repo) rate, lending fee, margin lending rate, haircut and maturity date are all required.
The SFTR is designed to improve transparency and monitoring of securities financing transactions that include securities lending, repo and reverse repos. The measures proposed are similar to EMIR, adopted in 2012, which introduced mandatory reporting for derivative transactions.
Financial services reform legislation “is forcing sell-side firms to look for outsourcing solutions,” says Eric Roussel, global head of product management — local clearing and custody, banks and brokers outsourcing at BNP Paribas Securities Services. “Although this is not a new trend, it has accelerated because it is not only reduces the costs but also helps our clients meet the deadlines. Regulation will not wait for them to be ready but they have to be prepared in time,” Roussel says.
Roussel adds that BNP Paribas, which has a product offering for brokers, wants to extend its reach and develop a multi-asset class service for investment banks. The French bank has a long standing relationship with Calypso dating back 10 years and believes that its “cutting-edge, market-led technology” can best meet the changing needs of its clients.
Pascal Xatart, CEO at Calypso, also notes that “this alliance reflects the seismic change that is taking place in the capital markets. Improvements in SaaS [software as a service] technology have given banks a legitimate alternative to the status quo, and the benefits of working with a back-office utility provider are substantial — reduced costs, decreased IT support, and simplified operations. Solutions like this one are exactly what the market needs and are consistent with the Calypso SaaS strategy.”
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