FIA Tech’s Andrew Castello talks to Jenna Lomax about starting his current role just before the pandemic, and why the firm’s new industry initiative, the Databank Network, is rapidly adding members
You’ve been with FIA Tech since 2019, what does your current role entail and how have your responsibilities changed over the last few years, given the COVID-19 pandemic and the technology developments it necessitated?
I am head of reference data at FIA Tech. I also manage our data bank operations. My major focus is on strategy, operations, and product development. I was appointed to take a look at FIA Tech’s existing reference data and work with the industry to expand it. Databank started with exchange fees and position limits that we acquired from the Institute for Financial Markets in 2018.
What really sparked our new reference data initiatives was reaching out to the industry and identifying industry participants’ painpoints. FIA Tech aimed to learn about the contracts themselves, and what happens to those contracts from the day they are listed, to the day that they are “delisted” — it’s strategising how to grow the business line, and how to work with clients to identify areas of interest and areas that are inefficient.
As for COVID-19, the immediate response of our management team was to consider the health and safety of all of our staff. Second, we had to consider how to operate day to day, however as a tech company, we had everything we needed to operate. One silver lining, if you had to have one from this terrible collective experience, is the effect it had on the work-life balance — we actually saw staff productivity increase during the pandemic.
Removing the commute allowed our staff to step away from their desks, to do what they needed to do for their personal lives, and then come back and get what they needed done. Luckily, even before the pandemic, we operated a global operations team that is offshore, and consists of individuals that we have never met. They did, and continue to do, a fine job remotely.
Can you tell us more about FIA Tech’s reference data strategy and the new Cash and Collateral service?
Through speaking with the industry about their painpoints, we realised that firms have fragmented and siloed data feeds. The main issue in the industry is that lots of money is being spent on overlapping data. For instance, if you have all these various vendors coming in, and then you are trained to plug them together, and then roll out that data to the front, middle or back-office, there is a lot of effort and money wasted from an operational standpoint from just trying to connect feeds.
It is still an issue. FIA Tech brings value by housing all of the above under one umbrella — allowing users to reference one single provider where they are able to send those data points. We also serve the industry better when working as a collaborator, and as co-competitors with the providers within our network, instead of being in direct competition with them. Direct competition in this industry does not always work.
Cash and collateral management are very manual processes. The acceptable collateral on haircuts, concentration limits, fees, and interest rates all have data points that need to be put into an operating or optimisation system. However, these are hidden in various different locations across the central counterparty clearing houses.
Currently, in the industry, whether it is onshore or offshore, there are entire teams that aggregate data daily and punch this data into operating systems — that is often a big waste of time and effort for banks. Being able to standardise that, while creating a schema that industry participants are able to tap into, automates the process while helping to reduce risk. We can accurately determine which collateral should be deposited or what the acceptable collateral really is. Those factors could change day to day.
We also have central counterparties that are updated daily. If a client is out of loop and not aware of what is going on, or there is a certain element missing in their operational process, they run the risk of not having the most accurate data in front of them.
If the Cash and Collateral service can help our clients to save capacity, and we can save banks time and money, we are going to help them do exactly that.
CQG and Trading Technologies have joined the FIA Tech Databank Network, an initiative to bring together independent software vendors, exchanges, clearing houses and other data providers into an interoperable global network. Why now?
Databank Network is about taking software vendors, exchanges and clearing houses’ data and having it interact with our data. Without that you have fragmented and bespoke processing, where you have teams that have to create those mappings.
Broadly speaking, with any of these independent software vendors, or order management systems, our service is similar to a Rosetta Stone — providing mapping and identification of the exchange product, and what the exchange actually calls a product.
This is because, at some point, those random alphanumeric characters will not mean anything to an individual until you provide meaning and give definition back to the exchange. Pointing it back to the exchange is extremely important. We hope this network improves the industry’s efficiency and that it becomes a key benefit for our clients. They all seem very excited to participate.
In October 2021, FIA Tech expanded its reference data offering with three new services consisting of Cross Reference Symbology and Contract Specifications. Can you tell us more about these services?
It is about understanding the basic economics of the contract itself. If you look at a contract, the first element we would look at is the grouping mechanisms of the contracts.
European Market Infrastructure Regulation is a good example of where we are able to help classify what these products are called.
When you have an individual or firm looking to see what is actually being referenced on the exchange, it is great to be able to maintain that kind of taxonomy, and then create our own FIA Tech taxonomy that harmonises the two and creates an industry standard of how these products are bucketed.
That helps with reporting; it does help with some settlements, because then you are properly able to classify that product.
Through understanding the basic economics of it — the contract size and the unit of measurements — you are able to assist in trade reconciliation, trade identifying, and also calculations that may need to happen within the back-office, and that could be brokerage settlement, or it could concern other types of settlement.
Being able to provide those in a clean, consumable manner really helps the client. Looking at the settlement portion of it, it is about looking at your first trade day, your last trade dates, your delivery periods, the actual settlement of physical contracts, and taking that giant, convoluted text, and breaking that down into a standard date format, that a system could understand.
Being able to tap into that feed and access the data that you need to settle whatever process you are dealing with, at the precise moment you need it, is a benefit.
What do you hope to expand on and achieve in the next 12 months as a network? What opportunities do you think you might see?
We have a few other independent software vendors that are looking to participate in the network, so we look forward to welcoming them.
Partnership discussions will be held throughout the next 12 months, but even after that, this is something that we will continue to grow.
One of the things I am looking forward to is opening the door to two-way data flow. By providing our ISVs data, we can work together and help solve their painpoints.
I am also looking forward to focusing on alternative delivery mechanisms, looking at various different new technologies. It is one thing to talk about the data, it is another thing to see the data and create customised reports.
What hurdles do you think you might face?
As far as hurdles go, there is currently increased competition in the marketplace. We also have to consider the complicated regulation that is coming down the pipe from the regulators. One example is the position limits with the over-the-counter swap equivalency that are supposed to come out at the end of this year. However, regulation compliance is an area in which we can shine. We can help members of our network to put together some sort of offering that will help assist clients and members in navigating that regulation.
The last hurdle worth mentioning is legacy technology that is used by clients. That is always a hurdle for any kind of technology vendor — gathering their data to interact with the systems that they are using. It can be a painpoint. In a perfect world, everything would flow back and forth seamlessly, but when you have some systems that are not ready for some of the new technology, or some of the datasets that have been put together — or the functionality is just non-existent — it takes a lot of time and effort to be able to adapt. That is a factor for any company as it grows.
Something the industry has to be aware of is how to communicate with old legacy systems. However, this is a hurdle that is not new to us, and because of that, it is a very exciting time to be working at FIA Tech.
