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MULTI-TENANT UTILITIES: THE FUTURE OF SECURITIES PROCESSING
 

MULTI-TENANT UTILITIES: THE FUTURE OF SECURITIES PROCESSING

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An avalanche of new regulations and the economic uncertainty means the capital markets and investment banking industry is seeing a rapid shift in business models. The industry’s focus on ...

An avalanche of new regulations and the economic uncertainty means the capital markets and investment banking industry is seeing a rapid shift in business models. The industry’s focus on electronification of asset classes and drive to reduce costs in traditional flow business means that significant investments are required in IT platforms to maintain scale, reduce cost-per-trade and remain relevant in the market.

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    MULTI-TENANT UTILITIES: THE FUTURE OF SECURITIES PROCESSING MULTI-TENANT UTILITIES: THE FUTURE OF SECURITIES PROCESSING Presentation Transcript

    • © 2013 WIPRO LTD | WWW.WIPRO.COM1 MULTI-TENANT UTILITIES: THE FUTURE OF SECURITIES PROCESSING
    • © 2013 WIPRO LTD | WWW.WIPRO.COM2 Multi-Tenant Utilities: The Future of Securities Processing HIGHLIGHTS An avalanche of new regulations and the economic uncertainty means the capital markets and investment banking industry is seeing a rapid shift in business models. The industry’s focus on electronification of asset classes and drive to reduce costs in traditional flow business means that significant investments are required in IT platforms to maintain scale, reduce cost- per-trade and remain relevant in the market. We explore a key industry trend on creating or joining a utility platform for securities back office processing and the associated functions. A utility is defined as shared platform across banks or within a bank to deploy technology services, operations services or both
    • © 2013 WIPRO LTD | WWW.WIPRO.COM3 Multi-Tenant Utilities are Coming of Age  The ever adapting capital markets and investment banking industry is exploring new ventures and partnerships to create platform services in securities processing  The primary functions of this utility are related to clearing & settlement, reconciliation, reference data and corporate actions  The players in the fray include outsourcing providers, securities service firms, product vendors, exchanges, market data providers, depositories and Central Counter Parties (CCPs)  Some of the established players are Broadridge, Pershing, State Street, Global Services and Euro Clear and Clear Stream While securities processing utility models are fast emerging, the key to success is choosing the right partnership construct and the utility operating model.
    • © 2013 WIPRO LTD | WWW.WIPRO.COM4 Choosing the right service model and partnership construct There is no single model. Banks must look at the extent of customization required in the platform for the internal trade workflows, data confidentiality issues, and the forecasted trading volumes before choosing the model that delivers the target savings Bank’s Internal Shared Platforms Software as a service/ASP (SAAS) Platform as a Service (PAAS) Business Process as a Service Shared IT + Outsourced Shared Operations Shared IT + Outsourced Distinct Operations Shared IT + In- House Operations Internal Shared services center of a bank Hosted platform shared by the banks for securities Processing Operations processes are managed by their in-house teams Internal shared platforms across different lines of Business Internal utilities are already set-up by many banks IT Platform characteristics similar to an ASP model Operations processes are also outsourced to the provider with distinct teams for each client In addition to PaaS model, the utility provider will pool in shared processes for commonly used non- proprietary functions Example: Instrument data, corporate action, event processing Platform Control Cost Platform Standardization
    • © 2013 WIPRO LTD | WWW.WIPRO.COM5 Key Considerations for Setting up a Utility While designing the scope of the back office securities processing utility, a combination of factors need to be considered to achieve realistic savings targets with minimal disruption to operations. The actual roadmap for implementation should be designed by keeping the requirements of the seed banks and the other partners in mind.
    • © 2013 WIPRO LTD | WWW.WIPRO.COM6 Design Principles for building a utility Whether to build it from scratch or partner with a product vendor? Both choices need to be carefully put through the following evaluation framework before a decision is made TYPICAL DECISION CRITERIA FOR PLATFORM BUILD
    • © 2013 WIPRO LTD | WWW.WIPRO.COM7 Business Case for the utility The typical savings potential that banks target are in the range of 30-50% but this can vary considerably 40-50% of savings could be achieved through lower spend for development, testing and maintenance of the platform. A standard platform could initially have a negative impact on Straight Through Processing rates. However, a flexible platform design could mitigate the risk A 25-40% reduction is feasible as long as the tenant-specific extensions are kept to the minimum 10-15% savings could be expected by sharing data center, development and test environments The potential impact of of integration and data transformation could lead to an additional cost of 5-10%
    • © 2013 WIPRO LTD | WWW.WIPRO.COM8 Measuring efficiency  A common practice used to measure the back office efficiency levels of banks and also the utility platform is by using a cost-per-trade metric  Intuitively, multi-tenancy will drive higher trade volumes on the platform, which will push banks down the cost-per-trade curve  Commonly agreed direct and indirect costs as well as the boundaries of processes need to be defined to make sure the cost-per-trade comparison is meaningful
    • © 2013 WIPRO LTD | WWW.WIPRO.COM9 Conclusion Multi-Tenant Utilities are the way forward. Multi-tenant utilities will bring the scale, best practices and cost variabilization that will drive the industry towards consolidation around a small set of high volume flow providers
    • © 2013 WIPRO LTD | WWW.WIPRO.COM10 For more details please visit the link below: http://www.wipro.com/Documents/multi-tenant-utilities.pdf
    • © 2013 WIPRO LTD | WWW.WIPRO.COM11 About Wipro Ltd. Wipro Ltd. (NYSE:WIT) is a leading Information Technology, Consulting and Outsourcing company that delivers solutions to enable its clients do business better. Wipro delivers winning business outcomes through its deep industry experience and a 360 degree view of “Business through Technology” - helping clients create successful and adaptive businesses. A company recognized globally for its comprehensive portfolio of services, a practitioner’s approach to delivering innovation and an organization wide commitment to sustainability, Wipro has a workforce of 140,000 serving clients across 57 countries. For more information, please visit www.wipro.com. For more information, please visit www.wipro.com
    • © 2013 WIPRO LTD | WWW.WIPRO.COM12 Thank You ©Wipro Limited, 2013. All rights reserved. For more information visit www.wipro.com No part of this document may be reproduced in whole or in part without the written permission of the authors. Wipro is not liable for any business outcome based on the views presented in this document. For specific implementation clients should take advise from their client engagement manager.