RegTech has climbed to the top of the agenda in the structured products market with a number of technology and automation initiatives being implemented on the back of new regulatory requirements around the manufacture and distribution of products, according to panellists during the Best Tech for Derivatives panel at the 15th Annual Europe Structured Products & Derivatives conference at the etc.venues, County Hall, in London.

Regulatory challenges have had a significant impact on the structured products market to the point that tier 2 firms are considering halting their activities in the market because of the potential liabilities, according to Fritz Jost (pictured), MD, platform partners, global head of acquisition at Leonteq Securities.

"The financial industry is facing its 'Uber' moment which is all about reducing costs, increasing revenues, improve client experience and meet new regulation," said Jost, adding that this has resulted in a shift from the buy- and sell-sides toward automation and scaling to stay alive. "However, we see new opportunities and value propositions around pre-trade, execution and post-trade."

Despite the challenges around the digitalisation of processes, technology will be key for the structured products market to address a number of requirements around investor protection which have been pushed by regulation, according to Geraldine Laussat, head of structured products, RFQ Platforms at ITG.

"Regulation is driving the shift towards technology but this is not a bad thing as the bottom line is that automation will help to improve internal processes and serve the end client better," said Laussat. "The challenge now for some firms is around arbitrage between in-house developments or third-party/outsourcing functions. Do you develop these tools internally or do you go to a third party deliver it for you? We believe that if an internal tool cannot add any added value or competitive advantage to a private bank they should look to outsource."

Some manufacturers and distributors of structured products have been developing meta-tools and digital functionalities for over ten years and have a strong footprint in this area of the market, according to Eric Wasescha, head of platform partners and pension solutions at Vontobel.

"Our focus from the very beginning was to improve client experience and deliver tools that are user friendly," said Wasescha. "The Uber moment encompasses a number of things including increase transparency, reducing costs, etc but for us the most important aspect of this shift is that it will allow us to simplify access and the client experience even more. We have pretty complex products on our platform and we want to capitalise on this trend to make it easier and simpler to the end user."

For other market players the focus is not on the client interface and the click and trade experience but about providing access to liquidity, regulatory data, and simplifying the placement of orders, according to Milind Kulkarni, managing director at fintech firm FinIQ.

"Our focus is on delivering a robust system for our clients in the buy- and sell-sides," said Kulkarni. "We are planning to launch new functionalities and apps and we are piloting and testing several initiatives such as pricing a product on a Wechat app, but at this point we think it is premature."

The focus in the current environment should be on delivering a robust and transparent framework for market players to operate, and not on gimmicks that may take the focus out of what is important, according to Kulkarni. "Regardless of the shift towards technology I don't see any fintech firms taking over banks any time soon," said Kulkarni.

Banks have a role to play as they are the ones with the structuring and distribution capabilities although fintech firms can provide support and facilitate and streamline certain functions but they will not replace banks, according to Jean Marc Eber, chief executive at Lexifi.

"We can make things easier for manufacturers and distributor to connect and transact," said Eber, adding that fintech is also helping to educate investors by putting the tools at their disposal. "But the products and the service will continue to be delivered by banks. Clients want more than price and the market is evolving with providers opening up their application programming interfaces (APIs) and standardising the way they describe products. Fintech companies can help banks to bring those standards to the market and a common nomenclature to facilitate product comparisons across different issuers."

Price discovery and connectivity were drivers around platform developments but the market is now using that same technology to address new needs and functions such as secondary trading, document generation, best execution, post-trade and full cycle management, according to Laussat.

"Regulation has forced the industry to move towards automation but clients are now pushing developments around product selection, documentation, payoff language and transparency," said Laussat.

Fintech and regtech are interconnected and are being integrated around different front-, middle- and back-office functions as we have seen with the packaged retail and insurance-based investment products (Priips), according to Eber.

"Technology is being used to meet regulatory requirements -document generation," said Eber. "But that same technology is being used to standardise the language/descriptions of products which will help to bring standardisation to the market for the benefit of the whole industry."

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