Awards for Excellence 2014: Best wholesale banking technology innovation

Best wholesale banking technology innovation: HSBC

It seemed an impossible task – the new world order of global regulators demanded information and data in real time from different formats, with different requirements in different regions and from different platforms. “As an industry we were used to trading in real time, but we were not used to collecting data about settlements and confirmations and portfolios on a real time basis as the processes just did not allow for assimilation of large data sets to be pooled,” says Sumeet Chabria, CIO for global banking and markets at HSBC. “Now all of a sudden the regulators were requiring additional transparency to ensure data was clean and in a single format that could be called upon near real time. It threw up a host of problems that all needed solving at once.”

HSBC was faced with a formidable challenge when it came to standardising its data. The bank is classed as a swap dealer, meaning that nearly all of its derivative trading has to be reported. Like its peers, it has many different trading systems producing data in multiple formats and it never before had to get all of this data into a standardised format.

There’s no point giving highly technical solutions that no one can use and implement Kieran Ebb

The response had to be flexible, stable, quick, resilient and above all, future-proof; trades can live for decades. The solution was to develop a global technology platform, the Data Service Layer (DSL). Broadly, DSL would collect hundreds of different types of trade data in one place before transforming it into a single standard for regulatory reporting.

Flexibility was key. “The first 12 months of Dodd Frank requirements were coming thick and fast and changing all the time so we needed a platform that would ensure quality but also timeliness,” says Kieran Ebbs, head of finance, regulatory and DSL IT. “We couldn’t be releasing software updates every three to six months, but rather weekly if required.”

In the face of this challenge, HSBC decided in 2012 that if one standard was going to be needed across the bank, then a lot more resources would need to be involved in the platform’s development.

“Each interface needed to meet the standard and deliver the trade information on a near real time basis,” says Ebbs. “So we decided to crowdsource across the bank.”

Each product area was asked to look at the problem and map it to their trade data. Above all, Ebbs says the key was to keep the process as simple as possible. “There’s no point giving highly technical solutions that no one can use and implement,” he adds. Some 280 people across the bank were involved in DSL’s development by the end of 2012.

By May 2013, DSL had gone live, following nine months of development. The implementation was transformational. For the first time, the bank had a single source of trade data across trading, post-trading and reference platforms or transaction processing systems. By May 2014 DSL was maintaining many millions of trade events in memory, processing in near-real time and more than 80% of the bank’s entire trade reporting data flow had been captured. Also by that date DSL was reporting trade data to the CFTC for Dodd Frank reporting, the Monetary Authority of Singapore, the Hong Kong Monetary Authority, the EMIR – European Market Infrastructure Regulation, and to the Australian, Russian and Indian regulators.

Chabria says the strength of the team working together on DSL across the globe (with the aim of ultimately supporting more than 50 countries) led to the higher quality platform being produced. “Under Kieran’s leadership everyone realised this was an opportunity to do something more strategic; we shared a long-term interest in the sustainability of the platform and senior management were supportive of the vision. We all knew we were reducing the complexity of collecting data and information.”

Its success has been tangible: a brand new requirement needed to be delivered to regulators in seven weeks. Says Ebbs: “Without DSL that date may never have been reached and potentially would have cost us millions of dollars in the process. However, it ended up being delivered on time and costing the bank just 10% of what it could have cost to implement a non-DSL solution.” DSL aims to reduce the interface costs for the Global Banking and Markets business by up to 50% over the next five years.

Chabria says the platform goes beyond complying with regulators’ requirements as they evolve over the coming years. “What it also means for us now is that we have data about our business transactions across the globe and across asset classes that we know to be clean and in real time. That is a tremendous amount of knowledge to now have and be able to leverage ultimately through the use of Big Data technology.”