In a Q&A, Kurt Eldridge, executive vice president, global head of sales for post-trade provider SmartStream Technologies, says that the company foresees more regulatory compliance changes coming for its clients. SmartStream won the Best RegTech Solution for 2018 honor via the FTF News Technology Innovation awards.
(FTF News got time with Kurt Eldridge, executive vice president, global head of sales at SmartStream Technologies, to talk about the regulatory road ahead and about SmartStream’s win as Best RegTech Solution via the FTF News Technology Innovation awards. At SmartStream, Eldridge oversees the global sales team and its associated revenue-generating activities. He became part of SmartStream in 2007, and for his first three years, grew the Australian operation, officials say. He has since helped expand global operations via the opening of the Canadian business and overseeing the growth of the North American region. Before joining SmartStream, Eldridge had positions with investment banks, working in commodities and futures trading. He also had worked in financial technology businesses.)
Q: What was SmartStream’s greatest achievement as a regulatory technology provider in 2017?
A: While we have deployed a number of solutions this year, including Reconcile.Trade with RegTek, I would say our most important contribution to the industry is the creation of the SIN [securities identification number] to ISIN [international securities identification number] mapping by the SmartStream Reference Data Utility (RDU).
The RDU has become the focal point of the market for this information because it has become critical for reporting purposes via the Systematic Internalizers (SIs) mandated by the MiFID II/MiFIR reforms.
As part of the wider market support, we have engaged with a significant number of Approved Publication Arrangement (APA) providers to be the foundation partner of this information for the global financial services market.
Without these engagements, the mapping of each participant would be required to ascertain a significant amount of information independently to enable efficient and correct reporting back to the regulatory body.
The cost to each market participant would be immense to meet the required regulatory time-frames, even if they were able to source the entire required data universe at all, which is constantly expanding with new issues every day.
Q: Why was it necessary for SmartStream to work with RegTek.Solutions rather than develop the Reconcile.Trade offering on its own?
A: To be honest, it was client demand as clients no longer want to piece together their own version of Frankenstein’s monster behind the firewall.
To avoid a monster, they are looking for solution providers that can bring together their areas of expertise to provide an end-to-end service offering. While the branding of the solution is reconciliation, the joint offering is actually much more comprehensive.
RegTek.Solutions and SmartStream have brought our global leading software, operations, and regulatory expertise together to deliver a turnkey, hosted service, providing pre-packaged, fully maintained control for regulatory reconciliations.
There are very few companies with the regulatory expertise of RegTek.Solutions and we both felt the business and commercial fit was ideal for this offering.
Q: How is Reconcile.Trade different from other reconciliation offerings, even SmartStream’s?
A: It’s unique because it brings together the offerings of two specialist companies.
Reconcile.Trade combines the reconciliation expertise from SmartStream — pre-configured, regulatory reconciliation models with integrated error and omission analytics — with the actionable regulatory intelligence from the assurance platform of RegTek.Solutions, which provides granular, field-level data accuracy, independent reporting eligibility, and determination.
In addition, Reconcile.Trade is not only a software offering but a fully managed service designed to keep clients up to date with all the requisite regulatory changes within minimal interaction or IT spend from the bank perspective.
By combining the two offerings, we support the reconciliation and regulatory model changes as part of the service offering. When there are changes to the data structure or reporting requirement, we are managing these changes and not the clients. We are lowering ongoing costs and ensuring a higher level of compliance. We keep the clients in front of change not chasing it.
Q: How long did it take to create Reconcile.Trade?
A: The creation of the joint solution was actually a lot faster than most people would expect. The first demo was created in days and a deployable solution within a matter of weeks of engagement between the two companies.
We used the standard out-of-the-box dashboard and capabilities of the TLM Recs Premium platform. Working with the RegTek.Solutions team, we were able to develop requisite regulatory complaint models and data integration points within minimal issues. This was the major advantage to having two market-leading suppliers collaborate within their own domain expertise.
Q: Can you quantify the market reaction to Reconcile.Trade? Were there new customers, new revenue levels, new licenses and so on?
A: Essentially, the first client that we presented the solution to actually became the initial client, which I have never seen before. We have found an interesting mix of both new and existing clients embracing the offering. As a managed service, it is not really a license play, but we expect the solution to become a significant offering for RegTek.Solutions and SmartStream.
Q: Speaking of MiFID II/MiFIR, how have North American firms reacted to the requirements that took effect in 2017?
A: We need to face the reality of the world we live in now. Given what happened over the past decade, increased regulatory scrutiny is only going to increase as the industry moves forward. Most North American firms have exposure to the European market so there was an immediate requirement to ensure compliance with these regulations.
However, from market discussions, the banks are leveraging the MiFID II compliance push and spending to gain a greater understanding of their internal exposures and also the subsequent risk inherent within their business. It is also allowing the business to really focus on what is important to them and which areas of the value curve they wish to compete in. The simple separation of research and execution costs has opened significant opportunities for a number of banks in growing their agency business with a clear mandate around client needs.
Q: What emerging technologies could have an impact on reconciliation technologies?
A: A number of these can both help and challenge reconciliation technologies moving forward.
We are investing heavily in both artificial intelligence (AI) and machine learning to enhance the core solution offering from SmartStream.
Both of these newer technologies will drive operational efficiency for the clients, enhancing data acquisition, lowering expectation costs and so on — something we have been focused on for close to 30 years.
We also see tremendous opportunities with blockchain, but we do not believe the market understands yet the complexities in deploying this technology into a wider financial system framework.
We believe that as the world changes there will still be requirements to reconcile different data sets and we have a significant role to play in bringing workflow management and data reconciliation to firms both on and off the blockchain.
Q: What can you say about future changes for Reconcile.Trade?
A: Unfortunately for our clients, we foresee more regulatory compliance changes coming.
As more and more jurisdictions adopt these transaction reporting requirements, the complexity is only going to increase. We are already engaged with a number of clients in helping them with the wider application of the solution for both Asia-Pacific and U.S.-based regulatory requirements.
From a solutions perspective, the offering is based upon the leading recs platform, which will continually be enhanced with such aspects as AI and machine learning and the further expansion of the reporting capabilities from RegTek.Solutions.