SmartStream Technologies made a little bit of history at this year’s Sell-Side Technology Awards by winning the best implementation category for the first time. Victor Anderson chats to SmartStream’s Vincent Kilcoyne about his firm’s relationship with Credit Suisse, and the extent to which sell-side firms are feeling the pinch when it comes to accurately and transparently determining their various fees and expenses.
SmartStream won the best implementation at a sell-side firm category in this year’s SST Awards. What was the implementation and how did it come about
Vincent Kilcoyne, executive vice president, head of product management, SmartStream Technologies: The business partnership between SmartStream and Credit Suisse has existed for many years, and this recent implementation was an evolution of the successful projects across other asset classes, but the driver here was to expand the functionality to cover other asset classes and fee structures that represent a truly global bank. Due to the fact that SmartStream provides a fees and expense management offering on a service basis, through combining industry expertise with operational and technical capability, we are able to ensure the optimal outcome for our clients in terms of speed and quality, thereby driving satisfactory outcomes and success.
To what extent are your clients looking to manage their various operating costs more transparently and in a more disciplined fashion?
Kilcoyne: This was a primary driver for the bank. As part of the evolution of the markets, banks are increasingly looking to gain a deeper and broader understanding of the structure and diversity of their fee structures. For many banks, growth is always on the agenda, but this program was aimed at providing the bank with a greater insight into the underlying behavior of the cost structures across a variety of drivers, namely, lines of business, asset class, geographic regions, trading partners, venues etc. By truly understanding this information at a forensic level, the bank is able to optimize their behavior and fee agreements to drive profitability and growth.
What are the typical challenges facing sell-side firms when they are looking to manage their various operating costs? What do they tend to overlook in terms of complexity?
Kilcoyne: In our experience, banks (and indeed all market participants) face some common problems around the quality of the underlying data. In most cases, fee structures have evolved over time and in accordance with the growth of the business, with many agreements having existed for a number of years. For this reason, harmonizing fee structures can provide a significant immediate benefit to the organization, but as an initial step, the actual capture and remediation of the underlying data presents a substantial challenge. As part of normal implementations, SmartStream experts encounter this problem frequently and as such we have developed a number of approaches and tools to assist in this process.
Where are the drivers coming from that are spurring sell-side firms to manage their costs more efficiently? Regulations, internally, or from their clients/investors?
Kilcoyne: In reality, the calls to action in this area are all of the above, together with an increasing need to understand the true cost of doing business. As the markets evolve both structurally and technically, it is possible for market participants to take advantage of newer emerging market practices to drive real benefit to the organization and their customers. Increasing disintermediation is providing organizations with challenges and opportunities, provided they can understand the cost of their operations and how to optimize their market practices to achieve specific levels of profitability and transparency, thereby satisfying their goals and compliance objectives. Some recent regulatory initiatives, such as the revised Markets in Financial Instruments Directive (Mifid II) are requiring organizations to have a greater control and understanding of their cost and price structures to ensure compliance.
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