LAND to give buyers and sellers space to expand products

The combined technology platform is designed to make it easier for investors to choose products transparently, and for product distributors to seamlessly execute these orders, said Erdem Ozgul of Numerix, at Hubbis' Structured Products Forum 2015 in early June.

An expensively-assembled structured products trading platform created by Leonteq, Numerix, Avaloq and DBS is designed to let customers select tailored products while allowing distributors to simply and seamlessly execute these financial instruments.

The system, called LAND in reference to the first initial of the four contributors, could help revolutionise the appeal of structured products across more Asian customers, Erdem Ozgul, head of South Asia at Numerix, told delegates to the Hubbis’ Structured Products Forum 2015 in Singapore in early June.

“What are our objectives as partners? First of all, in terms of the technology side [it is] to leverage from the technology truly end-to-end [solutions], not just focusing on for example RMs (relationship managers) in terms of their relationships with clients and the execution desk or advisers or research, but looking at each participant and maximising the throughput or the efficiency of each participant,” he said.

The four participants have done this by attempting to improve every step in the process of choosing, assessing and executing a product.

“We have looked at the complete value chain and tried to improve processes at every step,” says Ozgul.

“We believe this can unleash financial markets, increase liquidity, make markets more transparent, accessible, and diversified, and also make them more regulator-friendly.”

Key players

The LAND platform is designed to benefit buy-side and sell-side participants alike by offering structured products in a transparent, commoditised and highly secure fashion. Each participant brings something to bear in this fashion.

“Leonteq is a fintech provider and structured product manufacturer and distributor, and its approach has been to bring the experience from what it built in Switzerland where these products are almost fully commoditised,” said Ozgul.

“Today in Switzerland you can by tailored products for as low as EUR1,000 (USD1,102) in nominal value, while Germany has an excess of 1.5 million products outstanding that are listed just on its exchange.”

Numerix, meanwhile, is a leading pricing evaluation platform across all asset classes in treasury and capital markets as well as insurance, which offers solutions with structuring, independent risk management and evaluation. These are all key requirements in today’s execution- and risk-focused rules landscape.

DBS is bringing its business know-how and regional reach and expertise as an anchor buy-side and sell-side institution, while Avaloq offers sophisticated real-time pre-trade checks and post-trade processing. This is vital to prevent product errors or mispricing, which can be costly and embarrassing.

Leonteq and Numerix have spent almost USD1 billion over seven years to create the technology behind LAND; that marks a high barrier to entry.

Choice and execution

In terms of usage, LAND is designed to be intuitive.

Investors can enter the platform, choose their preferred underlying, product structure and pay-off, and immediately get a selection of the most likely products based upon smart data analytics in the system, said Ozgul.

They also get indicative term sheets, product overviews and ideas of how the product is expected to operate under different scenarios.

It’s important that the system offers a refined set of choices, as there are 2 million to 3 million different products a day on LAND.

“It has been a big data challenge, to slice and dice this information to end users in a meaningful way,” said Ozgul.

Meanwhile the sell-side distributors automatically receive client documentation to ensure the products meet with the investor’s personal preferences and that the instruments don’t contravene any of his or her portfolio restrictions. Once the investor executes the product, the system is designed to seamlessly go through post-trade settlement and checks, and present the customer with a non-legally binding fact sheet.

All of this is done through a secure private environment that “uses the latest security and encryption protocols where data that is communicated through a public network cannot be intercepted or hacked,” said Ozgul.

Universal translation

The LAND platform is designed to universally translate to every bank or institution’s particular technology too, to encourage the participation of more sell-side and buy-side companies.

The ultimate goal is to create a structured products eco-system.

“For the buy-side it comes to a one-stop-shop service, where they can access products from different service and dealers and use tools or RMs or independent asset managers or advisers to access the right product offerings and capture the right opportunities in market place,” said Ozgul.

The appeal for sell-side producers is a broadening investor base, an easier way to cover a broader array of product options, and the ability to specialise at whatever product area they are particularly good at.

“Today if you consider the balance sheets of banks like DBS or UOB are completely different and so the products they can offer will be different,” said Ozgul. “It is the same with [all other international banks].

“By bringing more institutions onto platform it enables them to focus on their strengths rather than compete where margins are very tight.”