FX: Traiana co-founder seeks to simplify risk management


Paul Golden
Published on:

The latest venture of one of the co-founders of market infrastructure technology firm Traiana aims to boost the confidence of banks and buyside firms in financial technology by simplifying the process of managing risk across multiple vendor and systems.

Roy Saadon, who left Traiana just over a year ago, describes Access Fintech, launched this month, as a risk management service that helps firms track the trade lifecycle and get a true sense of prioritised risk across an increasing number of systems by bringing together fintech providers and in-house technology, orchestrating the interaction of the distributed providers and creating a single visual display of the risk of financial transactions.

The appetite for fintech in the FX market is evident from demand for lower latency trading and network performance analysis, as well as growing interest in the potential of machine learning to inform trading.

Demand for risk management is growing even more rapidly. Yet Henry Wilkes, co-founder of Institutional FX Advisory Partners, refers to “huge disparities” in the ability of banks to track risk, suggesting that while there is a group of leading banks that have the resources and appetite to build sophisticated risk models and track risk comprehensively, many others continue to struggle with complex structures and markets.

Roy Saadon,
Access Fintech

Saadon says the adoption of new technology has been stunted by concerns about loss of control, the burden of regulatory requirements and the cost of incorporating new fintechs. He suggests that while many great ideas are available, potential customers are suffering from vendor management fatigue.

He says that his service (the beta version of which was introduced in the first quarter of this year) enables the adoption cycle by providing solutions to the root cause — retaining the required operational controls to aggregate the (newly) distributed financial life cycle; creating a vendor management vehicle that tracks risk; and providing a sandbox for new products, allowing firms to try out technology without committing to big investment.

A dashboard offers customers a dynamic view of their risk profile across all vendors and internal technologies globally and in real time. This holistic view of their risk profile should enable clients to define risk levels, assign external ownership with outsourcers and counterparties and better share the costs of technology.

“This will ultimately free them up to further embrace new technology,” says Saadon, who hopes to exploit the shift in what banks and the buyside consider core elements of their business as cost pressures force even previously conservative banks to search for off-the-shelf outsourced risk management solutions.

Control issues

Combining new and legacy technology creates control issues. Access Fintech aims to address these issues by managing risk across vendors, providing a clear and prioritised view of risk across the many providers that handle each trade.

“FX trade processing has become more challenging,” says Saadon. “Regulatory requirements such as EMIR [European Market Infrastructure Regulation] and MiFID II [Markets in Financial Instruments Directive II] have defined a new set of rules. Risk is no longer just exposure to counterparty/market — it is now measured in terms of process control and timely management of exceptions. Managing risk often means understanding, prioritising and allocating exceptions in a manner that does not leave the firm exposed.”

Access Fintech addresses the need to reduce cost and increase returns on technology and operations expenditure, as well as the push for buyside self-service, according to Saadon, who refers to regulatory risk and the new sell side coverage model as the key factors behind buy side demand for self-service.

“With sell side firms aiming to become more of a utility and reduce their IT operation budget, trades that require intervention will be passed back to the originator to fix at source,” he says. “Buyside clients are willing to assume ownership of such issues, as long as it is through a scalable process that covers all their providers.”

Saadon was unwilling to disclose details of participants beyond observing that the company has signed up a number of banks and global buyside firms and connected to their vendors (settlement providers, distributed ledger technology providers and credit systems).