Citi is looking to develop a frictionless solution for post-trade processes by combining its proprietary custody network with Snowflake’s data sharing and multi-party permissioning capabilities.
Securities services is big business for Citi. The bank’s Q3 results reveal securities services revenue of $692 million – up 10% from the same period last year, despite total markets and securities services revenue falling by 4% year-on-year.
Global revenues have been under pressure, remaining flat during the first half of this year, even though equity markets reached an historical high, according to the Coalition index for securities services.
A whitepaper published by Citi in October – titled Disruption and transformation in financial market infrastructures – referenced a complex and fragmented post-trade environment and acknowledged the technology adoption challenges presented by the size and number of interconnecting organizations in the post-trade space.
The potential applications extend beyond transactions. Income and lending are just some of the areas we could explore
Fiona Horsewill, Citi
Okan Pekin, global head of Citi securities services, observes that the bank is striving to provide solutions to the challenge of multiple records across multiple systems and the associated costs and data-reconciliation consequences that hinder clients and the wider industry.
Fiona Horsewill, head of data at Citi securities services, observes that in the post-trade execution environment, once the transaction is executed, it is recorded in multiple systems by multiple counterparties.
“All these counterparties are reconciling and where they find a discrepancy, they then have to fix it,” she says. “This is the friction we are removing from the process by looking at a common source of data, which counterparties can access.”
Removing friction
The partnership is designed to improve data flows for securities services clients by removing friction, taking cost out of their processes so they don’t need to have so many people searching for answers or undertaking bilateral conversations with counterparties to fix errors.
“They will have access to more up to date information to allow for better decision making as well as having visibility around exposures,” says Horsewill, who adds that Citi is used to co-developing with clients, so everyone will have given their agreement to be part of the process.
If post-trade processes were being designed today, they would be delivering on the cloud
Okan Pekin, Citi
The service will be available only to Citi clients initially. “However, if you look at what we did with Proxymity and the proxy voting chain, we started that internally and it has now been spun out as a company with full participation and backing of other custody banks,” says Horsewill. “But we are still in the early stages of development and are focused on our clients at this point.”
This is a globally valid proposition to put in front of clients, adds Pekin, noting that there are parallels between post-trade and other areas of the financial services industry where processes have been around for some time.
“If post-trade processes were being designed today, they would be delivering on the cloud rather than through multiple layers that communicate inconsistently with considerable latency,” he says. “However, the industry could not simply dispose of existing infrastructure built up over many decades from securities settlement to confirmation to corporate actions, which is why marginal adjustments have been made.”
At the announcement of the partnership with Snowflake, Chris Cox, global head of data and digitalization for Citi securities services, said that in addition to adding the Snowflake channel option to existing real-time APIs and visualizations, the partnership opened the door to other interesting possibilities.
Horsewill says: “The potential applications extend beyond transactions. Income and lending are just some of the areas we could explore in the future.”
Citi is the latest in a series of financial institutions that Snowflake has partnered with. In February, BlackRock announced that its Aladdin data cloud solution for investment managers would be powered by Snowflake’s platform, while in December, State Street referenced its partnership with Snowflake at the launch of its Alpha data platform.
