DC: Price discovery remains a key concern for cross-asset securities, and depends on multiple factors, such as data quality, operational and IT support, models, implementation and skill in using the models. Each of these ingredients is instrumental in producing a defendable verifiable price level.
TF: What are the regulatory hurdles that need to be overcome?
DC: As ever, it is important that we have an environment where the risk factors for doing business across the financial markets are understood as clearly as possible. There is a useful and healthy role for regulators to review and monitor the activities of those they regulate, so that the market can be supported by better, more robust and resilient industry framework and infrastructure.
However, we have always maintained that it is of the utmost importance that legislation to bring greater oversight to the OTC derivatives market must take into account the differences between the various products used and their specific functions.
Companies often use OTC derivatives to customize hedges to their specific exposures when standardized, exchange-traded products do not reflect their actual risk. Some of these customized contracts cannot easily fit within a mandatory clearing or exchange-trading model.
The effect of forcing such companies to go through an exchange or clearing house would limit their ability to manage the risk they incur in operating their business. Regulation must therefore recognize the size, scope, and variety of products in the OTC space in order to reach this delicate balance.
TF: SuperDerivatives' mobile/mobility strategy – what’s the genesis of that? I’ve heard of firms using iPads to remote into their OMS/EMS on their desktop so it doesn’t have to reside on the tablet. Is that an approach you considered?
DC: That is effectively how we put SDX on the iPad. Rather than build an SD App, we used the Citrix App, which is already an established means of delivery for us. The user logs into Citrix then into SDX and can see SDX as if it was on his desktop.
TF: How do banks embrace/interact with mobility software and devices?
DC: Banks have been much more open than we had feared; they are embracing the new technology and can see how this can help their people be more effective. We have had plenty of comments from traders and sales people who feel almost 'liberated' in that they can work away from their desks like never before.
TF: What are the challenges around that? Are compliance and surveillance big issues?
DC: As SDX is a cloud-based application, there is no difference between being at your desk or on your iPad. If you capture a trade on your iPad, it is processed in exactly the same way as if you were at your desk; there is no risk of data loss.
TF: What are the big pushbacks that you get from clients and how do you overcome them?
DC: It's not really pushbacks. Some clients are slower to embrace the new devices than others; it’s a new device and we are all still learning what is possible and how to use it to complement existing technology.
TF: Who else is in this space?
DC: We don't think there is anyone using an application like SDX on the iPad but I am sure there will be others coming, we just need to make sure we stay ahead of everyone else!
TF: Thanks David.