Forefront Communications

FIA: Fintech Firms Predict Coronavirus Will Speed Up Digitalization

Alexandra Hamer

Alexandra Hamer

Times of crisis have always tended to foster innovation and accelerate technological change. When it comes to the futures industry, coronavirus (COVID-19) looks like it will be a similar driver.

Fintech executives believe the pandemic is speeding up a digitalization of trading systems that was already underway, as trading firms adopt more virtual tools that help them cope with the triple threat of high volume, extreme volatility, and the lockdown life.

Fintechs show their value

“The current volume and volatility spike has most definitely made the need for third-party platforms like ours more apparent for a lot of folks, but truth be told things have been moving in this direction for several years now,” said Patrick Flannery, CEO of MayStreet, a provider of market data infrastructure that is based in New York.

Margin and collateral management solutions are also in greater demand now, perhaps because people have seen them prove their value in markets that have continued to function through wild extremes.

In the first quarter of 2020, the total number of contracts traded on derivatives exchanges worldwide rose to 11.41 billion, an all-time quarterly record and an increase of 43.2% over the first quarter of 2019. However, despite high volume and volatility, the markets never seized up as in 2008, noted Karl Wyborn, global head of business development for Cloud Margin, a London-headquartered, cloud-based collateral and margin management service. Wyborn ascribes this in part to the availability of margin-monitoring services to smaller firms, which was not yet the case during the financial crisis.

Such tools are useful not only as a way to assess risk but to reduce cost by offering tools that optimize collateral funding costs across an entire portfolio, according to Liam Huxley, founder and CEO of Cassini Systems, a New York and London-based company that provides collateral and margin analytics.

The fallout of coronavirus has not only dislocated markets, to an extent, it also has relocated them. Lockdown has kept traders home, increasing the need for surveillance software that can track their conversations wherever they are. Executives at VoxSmart, a multi-channel trading communication surveillance service, say they are getting more calls to license their real-time communications monitoring tools for mobile phones and messaging services.

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