Since October 2016, a number of banks and structured products providers including ABN Amro, Credit Mutuel Arkea, Edmond de Rothschild, Garantum, HSBC Private Bank, Natixis Asset Management and Neuflize OBC have licensed LexiFi's Instrument Box technology or LexiFi Apropos software to automate and manage their structured products and derivatives. SRP spoke to Frédéric des Closières (pictured), head of sales & marketing at the technology provider, about the direction of the market and what can the company offer to streamline the pricing and management of derivatives and structured products.
"Developing a technology, such as LexiFi's, takes a few years on top of which you need time to educate the market about the benefits provided by the technology," said des Closières, adding that the company's product offering has evolved essentially into two: Instrument Box and Lexifi Apropos, where the former contains Lexifi's technology packaged as a library that can be integrated into other applications.
LexiFi Apropos is an extensible end-user software platform for the unified treatment of over the counter (OTC) derivatives and structured products, according to des Closières. "Instrument Box's clients may opt for a complete technology transfer program to benefit from Lexifi's field-proven expertise or choose a more classical partnership-like approach," said des Closières. "Our [LexiFi Apropos] solution is designed to serve as a system of record for non-standard transactions by bringing together all data and services needed to develop, market and manage tailored financial solutions, including pricing, lifecycle management, reporting and documentation."
The two products are complementary, as they were built on top of each other, according to des Closières. "If we compare it to the automobile industry, Instrument Box would be an engine and LexiFi Apropos would be a car around it," said des Closières. "We provide the best of both worlds to our clients: some want to integrate Lexifi's technology into their own applications, others want an immediate ready-to-use application; and we supply both."
Software and service providers, but also bigger financial institutions, are typically interested in Instrument Box, according to des Closières, who points at Bloomberg as a good example of how the technology can be used to develop internal tools. Bloomberg licensed Lexifi's Instrument Box technology in January 2016 to develop its derivatives library (DLIB), and make it accessible through their terminal. "DLIB is developed on top of LexiFi's technology," said des Closières. "Given our unique architecture and novel payoff code generator approach, Bloomberg was able to easily integrate their own valuation models while keeping the generic financial contract manipulation framework of Instrument Box."
Where sellside players, such as investments banks, are mostly interested in Instrument Box, buyside financial institutions, like asset managers, private banks, brokers or insurance companies tend to use LexiFi Apropos, according to des Closières. "Our software is, of course, tailored to each of our clients in order to meet their specific needs, but all of them have access to the same unified technology and quantitative tools," said des Closières, noting that some clients will be more focused on post-trade services, inherent to a business model focused on client services, typically private banks. "Others will value our pre-trade module to engineer new products, to identify opportunities through optimised combinations, using the industrial price-discovery and transparent payoff explanation framework."
Des Closières expects Lexifi to continue to grow and advanced that the company is involved in a number of projects that should materialise in the second and third quarter of this year. "Some of these projects will remain confidential for some time and others are more traditional projects, with manufacturers and distributors looking to boost and extend their capabilities for structured product analysis, documentation production such as Kids (key information documents), pricing and advanced reporting," said des Closières.
Related stories:
Consolidation and democratisation of technology driven by regulatory pressure, SRP Europe
Lunchtime used to be when salesmen waited for the pricing team to do their bit, SRP Asia
Bloomberg boosts new DLIB with Lexifi technology
LexiFi: The key element around automation is not connectivity but defining standards