Deutsche Bank has announced the launch of its dbIntegrate service, which utilizes the bank's venue connectivity and post-trade experience for a front-to-back office equities trading solution.
Powered by Deutsche's Autobahn platform with support from its Direct Securities Services (DSS) division, dbIntegrate manages execution, settlement and custody services. Through the service, banks and brokers essentially outsource their trade lifecycle to the bank, which connects to 70 equities venues, and acts as a direct custodian in 33 markets.
"Over the years, the equity market has become more and more complex, post-Mifid," says Andrew Morgan, co-head of equities trading for EMEA at Deutsche Bank. "The numbers of venues, the features offered by them and the number of upgrades they go through for their own competitive approach means that the overheads associated with maintaining connectivity and accessing these venues in the smartest way have become onerous. For a firm like Deutsche Bank, we have the resources and the scale to continually invest and ensure that we stay ahead of the curve and have cutting-edge products to offer to clients. For banks and brokers, particularly in an environment where volumes are off maybe 30-40 percent, that becomes an acute challenge for them."
Cost and Benefit
Morgan posits that any firms under the so-called ‘bulge bracket' are finding the costs and technical requirements associated with connectivity and other areas within equities trading to be particularly challenging. Coupled with declining volumes, the expense and technical nature of operating an equities division is leading some to consider leaving the market altogether.
"If you're a broker-dealer or a bank using different execution and settlement agents for each jurisdiction you're trading in or maintaining your own membership, it involves posting collateral at multiple central counterparties [CCPs], and also the risk associated with multiple relationships either with other brokers or third-party clearers," he says. "What we're able to do is offer a packaged solution with a custody and execution product, while owning the trade life cycle from front to back. Our settlement internalization capabilities and our fully automated service offer clients cost and operational efficiencies, and take away that overhead related to maintaining best-of-breed execution technology, at a time when more and more venues are changing their feature set on an unprecedented basis."
While outsourcing has become a high-priority topic of late within financial services, this is one of the first major moves to apply the process, front-to-back, through the trade cycle on the part of a large institution. Deutsche will offer algorithmic selection and its smart order routing technology as part of the deal, along with its connectivity and settlement capabilities.
If you're a broker-dealer or a bank using different execution and settlement agents for each jurisdiction you're trading in or maintaining your own membership, it involves posting collateral at multiple CCPs, and also the risk associated with multiple relationships.
"We have clients who may be using other brokers and are looking to use this instead , as well as those who may have their own memberships and are looking at it, and those who may have already been Deutsche Bank customers on one level on the custody or execution side, and who are now looking to leverage the integrated product," says Morgan. "The execution technology is all provided by Autobahn, and the settlement/custody component is provided by DSS, part of our transaction bank. We have a joint venture between the two parts of the firm."
While many firms offer business processing outsourcing, execution outsourcing, post-trade outsourcing and many other areas, Morgan believes that the scale of Deutsche is what provides a unique product in a bloated market.
"We have Central Securities Depository [CSD] access and direct clearing membership of 30 different markets globally, and we have execution membership of over 70 venues. So when you have, on the clearing and the executions sides, the ability to own in house the entire life cycle of an order, there are efficiencies that you're able to take advantage of around the way that you net and the pricing tiers you make your way through due to the volumes you're processing," he says.
The Bottom Line
- Deutsche Bank's offering leverages its global presence and execution capabilities to provide an outsourcing model that essentially encompasses the entire trade cycle.
- The bank says that the product is applicable to broker-dealers and banking institutions that fall under the bulge bracket of the highest-tier, most globalized entities.
- Deutsche also added that the program is capable of being extended to other asset classes outside of equities, in the future.
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