SG: The world of single-dealer platforms is evolving across markets

Following the launch of SG Markets API and SG Markets SP Optimiser last week, SRP spoke to David Wood, head of electronic business equity, derivatives and cross asset at Societe Generale, about the new tools and how single-issuer platforms need to keep innovating to remain relevant to private banks and wealth managers.

How did this new development come about?

“Increasingly clients are seeking to develop their own tools and we are also seeing new platforms entering the market. The world of single-dealer platforms as the only place distributors go is evolving across markets. You have to react to that as otherwise you would step back in time to legacy technologies. This has been a problem for many years and was somehow addressed in Apac via the email pricer, which is old technology, very difficult to manage, highly unstable, and doesn’t scale very well. But it was easy to implement.

We didn’t want to replicate the old models from Asia, we wanted to build a capability that would expand the channels that people use to access our pricing using the technology we have to provide access to everything that sits within SG Markets via an Application Interface (API).

Why an API is the best way to deliver this tool?

We didn’t want to create an entire new system but a system that would interact with our clients’ own systems. The creation of new APIs is in line with our wider SG Markets strategy. We have built a number of APIs to provide access to many different services within SG.

APIs are usually not visually appealing and in this case is just a succession of coding lines but we have created a tool that enables structured products professionals and people with limited knowledge of coding, to experiment with the API, so that they are able to design and build their own pricing models. 

What would you highlight of the new functionality?

We have developed a system where you can build your product using the API. We have extracted all the elements from the SG Markets interface (swaps levels, settlement type, issue price…), and transferred them into the API. You can interact with any of those elements so it can be quite complex, but as the API follows all the logic with SG Markets our clients can use the two side by side to verify their setup and results. The key for this tool to work was to make sure it could communicate with our clients’ existing pricing tool so that the two systems can talk to each other.

But we didn’t stop at pricing, we have added other functionalities such as the regulatory processes. This was based on the feedback received from clients, which suggested that when they are using the API they would like to also download a Kid or a termsheet as it’s often mandatory for them when sending out product ideas to their investors, we also offer the possibility to access product governance details such as target market.

Is the new tool a reflection of the market moving beyond ‘price discovery’?

The idea is to provide access to the key SG Market functionalities regardless of the channel clients want to use. The API allows clients to send their price requests, and they can then download the results into their systems. It’s a very standard two-stage process. The output provides a full set of data, including date schedules, which some clients need and want to use in their life cycle management. One example of where the technology is much more advanced than the old ‘email pricers’ is the API also allows our clients to retrieve any SG market quote or trade they have done and transfer it to the middle- or back-office systems.

What else is new in SG Markets?

We have launched a new  ‘basket optimiser’ which enables clients to send a batch of underlying stocks and the system then will run an algorithm that essentially calculates the optimal basket (for best return as opposed to suitability) of stocks for a product. The system can processes over 8,000 variations of the basket in few minutes. This is a very interesting tool for advisers as it enhances the process around idea generation, product creation, better returns, etc. We are often asked if there is a future for single issuer platforms, and this is an example of how we believe they are well placed to develop new ideas and functionalities whereas for multi-dealer platforms is not as easy as their focus is on supporting standardisation. That’s why we see people using hybrid models of single and multi-dealer.

Has the usage of SG Markets gone increased/decreased over the last few months? Are these developments helping to drive activity?

We have different people using SG Markets in different ways now, from all over the globe. SG Markets usage continues to go up, so we don’t see clients stopping using SG Markets because of changes in regulation but actually now using SG Markets as part of their best execution reporting process. We think the API helps clients using different channels to do this (internet system, web applications…) even more efficiently.

The multi-dealer platform space is quite fragmented, as there are several different needs and reasons for using them. For some banks they need to be able to structure their processes for regulatory reporting, where others are looking for platforms to provide efficient access to a wider group of investment advisors, and through all this there is a drive for efficiency.  So it is definitely not a ‘one size fits all’ solution, especially in Europe where the market is quite diverse.

Developing our API has been as a direct result of the many different solutions and platforms emerging, and actually aimed at facilitating the access for those firms that have not necessarily industrialised the use of technology. We want to provide different ways of accessing our offering. We are agnostic to the fact that some clients use our portal, they connect our API to their own excel tools, or if they want to access us via multi-dealer platforms. There are different costs and aspects you have to take into consideration when using the different channels but ultimately it all comes back to the same place, and your clients get the same response and service.

Has SG Market helped to address some of the issues we saw with the Priips Kid coming into effect?

As much as we all have had issues with the structure of Kids, I think they are actually good, at least from a platform perspective. The regulation has forced some standards, now you can price a product and get a Kid in multiple languages almost immediately, and the SG Markets platform has proven to be a very good place to help deliver this change. Platforms are allowing us to deliver this very valuable information quite quickly, which definitely provides a better service for investors.

The other good thing about Priips Kid launching is we have now been able to invest more on innovative technology, and the private banking and wealth management side is also focusing more on other things rather than just regulation. We see an increase in their use of technology and platforms to address their needs in terms of driving efficiency, reporting and structuring their workflows.”