In other news, OneMarketData is hiring, AltTab Capital opens a London office, and BetaNXT launches “Ops as a Service.”
Sanctioned Securities Creating New Woes for ETFs
Data vendor SIX reports that the “number of securities tainted by sanctions has increased by 262 percent since the Ukraine war began in February 2022,” which creates a new set of operational problems for buy and sell-side firms especially those working in exchange-traded funds (ETFs).
The discovery stems from the work of the SIX Sanctioned Securities Monitoring Service (SSMS), which says that “the number of securities in scope grew from 24,000 on February 2022 to 89,000 today,” according to SIX.
“The growth in the volume of sanctioned securities creates a headache for market participants across buy and sell-side institutions, including those creating or providing ETFs for clients,” according to SIX.
“This is because firms need to screen their ETFs and funds for sanctioned and, or tainted securities, in accordance with The Office of Foreign Assets Control (OFAC) compliance commitments, following Executive Order 13959 introduced in November 2020. This is in conjunction with greater scrutiny around reputational and liquidity risk since the start of the war in Ukraine,” according to SIX.
“This is a big wakeup call for the ETF universe, as the rollout of sanctions on Russia and China shows no signs of abating, meaning the number of ETFs with sanctions or tainted securities is on an upward trajectory,” says Oliver Bodmer, senior product manager, financial information for SIX, in a prepared statement.
“In this fast-moving sanctions environment, those firms creating and distributing ETFs need transparency to ensure they are able to act in line with OFAC requirements on the funds already created and ensure that no tainted securities are included in new products,” Bodmer says.
“Specifically, regarding ETFs, data pulled from SIX SSMS shows that roughly 7 percent of all ETFs contain securities tainted by sanctions. Of the sanctioned components found in ETFs, 30 percent originate in Russia. 26 percent originate from China and 30 percent in the US highlighting the broader impact of global sanctions regimes,” according to SIX.
“The ETFs containing in-scope securities are mostly domiciled in China, with 47 percent in mainland China and 7 percent in Hong Kong. Almost 30 percent are domiciled in North America, with 28 percent in the U.S. and 7 percent in Canada, while 13 percent are domiciled in Ireland,” officials say.
“The growing presence of sanctioned securities within ETFs could have detrimental effects on the valuation and liquidity of tainted ETF products, as assets are allocated into different investments with better performance that do not contain in-scope securities,” according to SIX. “A continued and growing presence of sanctioned securities in ETF products would create reputational issues for the firms who create ETFs and the sell-side firms who distribute them to their clients.”
OneMarketData Accelerates Hiring for Technical Talent
Officials at OneMarketData report that the tick data management and analytics vendor is making a “significant investment to support unprecedented demand for OneTick Trade Surveillance.”
“OneTick has been aggressively hiring technical talent in 2023 to support its flourishing regulatory solutions business and plans to increase its engineering headcount by over 60 percent throughout the year, with the immediate opening of dozens of new software development positions,” officials say.
The vendor adds that over the last year, ”a record number of new clients have selected OneTick Trade Surveillance, including a leading exchange in North America that turned to OneTick to handle 500B+ messages per day,” officials say.
“The company also won a competitive bid for a major regulatory agency; delivered powerful capabilities for a Swedish bank, a major Swiss bank, a 50B+ hedge fund, and a Belgian bank; was selected by two major top-tier asset management firms with a total of ~$500 billion in AUM; and significantly expanded its existing deployment for one of the world’s largest stock exchanges,” officials say.
OneMarketData “has already expanded its regulatory solutions team and introduced new OneTick Trade Surveillance functionality in 2023,” has had key milestones such as the:
- The appointment of Shailesh Dwivedi as head of buy-side regulatory solutions. He is a capital markets veteran and former OneTick client;
- Streaming/real-time surveillance feature that can scale for high-frequency data while keeping false positives in check;
- Nanosecond level event-by-event order book replay functionality; and
- An expanded out-of-the-box scenarios suite to “address buy-side specific risks such as portfolio pumping, window dressing, churning and more.”
“Today OneTick is deployed by more than 150 capital markets customers around the world,” says Dermot Harriss, senior vice president of regulatory solutions at OneMarketData.
Digital Asset Hedge Fund Opens London Office
AltTab Capital, a cryptocurrency and digital assets hedge fund company, has launched an office in London, U.K., “which will allow it to expand its network of international professional investors and other partners,” officials say.
“AltTab Capital was founded as an investment company in North America in 2021 and the fund has timed this launch to take advantage of thawing conditions in the digital asset markets to establish a presence in Europe,” according to an official announcement. “The fund currently has an AUM of $19M, including its principal Forerunner Fund and a number of Special Purpose Vehicles.”
The firm “began as an evolution of a family and friends fund that had been established by Dr. Raymond Ng in 2017,” according to the announcement.
Ng, a physician. “moved into crypto trading full time” and co-founded AltTab as chief investment officer, officials say. The firm has hired former Microsoft and Google engineering leader Greg Moritz as chief operating officer (COO), and former Google partnerships and platforms lead Michael Silberberg, who will manage up the London office as head of investor relations,” officials say.
AltTab officials say that London is “the ideal European base due to a number of advantages; the U.K. is home to the second largest hedge fund market in the world, after the US, with more than 500 set up in the capital since 2019. Meanwhile, the regulatory environment is increasingly favorable toward digital assets, and the established technology and finance hubs present in London provide a wealth of talent for AltTab to draw on to fuel future expansion,” according to AltTab.
The firm’s Forerunner Fund, is “an open-ended crypto hedge fund which offers four sources of return: dynamic holding, yield farming, active trading and cash equivalent reserves. It takes a macro approach to understanding investment themes driving the cryptocurrency market and invests in the top-performing cryptocurrencies over a longer term,” officials say.
“AltTab’s Special Purpose Vehicles are mechanisms for a number of illiquid venture-style investments that they offer to their investor base,” officials add.
BetaNXT Launches ‘Operations as a Service’ at SIFMA Ops
BetaNXT, a provider of wealth management infrastructure software, launched its “Operations as a Service (OPaaS),” an outsourcing solution targeting middle and back-office operations at wealth management firms, at the SIFMA Operations Conference and Exhibition in Orlando, Florida, last week.
“We launched OPaaS, in large part, so that we manage the nuts and bolts of our clients’ operations while they pay attention to their clients and their needs,” says Stephen C. Daffron, CEO and chairman of BetaNXT, in a prepared statement.
The BetaNXT’s OPaaS solution provides resources and a comprehensive technology platform built on four primary services:
- The Technology Services (Beta Cloud): For the the management of clearing technology and BETA integrations, data security, scalability, reliability, and G-SIFI compliance;
- Operations and Asset Services: For account opening and maintenance, transfers and money movements, clearance and settlement, margins, corporate actions, mutual funds and client reporting;
- Business Management: The knowledge and operational service functions to support treasury and business management; and
- Conversion and Acquisition Services: For the integration, data conversion, project management, and consulting services that facilitate initial conversion and ongoing acquisitions to the BetaNXT platform.
BetaNXT has appointed Joseph Colaizzo to manage the OPaaS solution. Colaizzo has most recently been head of risk management and internal audit at Mediant Communications, and previously served as the head of brokerage operations for Vanguard “where he led the transformation of brokerage operations as part of Vanguard becoming a self-clearing broker dealer,” officials say.
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