ION, Clarus detail real time vision for post-trade

An acquisition earlier this month saw a stalwart of the over the counter (OTC) margin and analytics landscape team up with a capital markets infrastructure powerhouse.

Global Investor spoke to the chief executive officer of Clarus Financial Technology and ION Market’s head of product management for cleared derivatives to discuss their plans for the future as ION looks to integrate Clarus on to its platform.

A clear opportunity from the Clarus perspective is to extend its existing market data services beyond its core offering focused on interest rate swaps and futures in the major currencies and credit markets, and into the wider futures and options space.

“We have collected data on futures volumes for years, which we added to our existing swaps data to compare on a like-for-like basis,” said Amir Khwaja, chief executive officer of Clarus Financial Technology. “The opportunity we see is to add more futures data outside the major interest rate currencies as well as for foreign exchange, equity and commodities markets and offer that to the ION customer base.”

The move ties-in with a vision shared by both companies about the evolving nature of OTC markets and the needs of trading firms as regulatory change requires more sophisticated risk management tools across businesses.

“One of the key drivers of the acquisition is the convergence of the OTC derivatives with the exchange-traded space,” Francesco Margini, head of product management for cleared derivatives at ION Markets, said.

“As a result, we will be able to extend our existing ETD risk management offering to include real-time margin and analytics data for cOTC and OTC derivatives. Customers are telling us they would like a real time solution capable of providing a holistic view of clients’ liquidity and risk across these asset classes. From the client perspective there is a regulatory mandate to monitor post-trade risk in real-time, however there is no clean solution in the market with such capabilities. With Clarus joining ION, we believe we are best placed to offer that.”

A key part of creating that solution will be the integration of different parts of the ION platform in one place, including extending its JANUS pricing and valuation platform.

“With regards to the JANUS risk management solution, we will soon start the work along with Clarus to integrate it with our XTP front-to-back suite: trades and positions will be fed in real-time from the ION execution and clearing platforms, removing the need for customers to undertake these challenging integration tasks, massively simplifying their existing business processes and technology infrastructure,” Margini said.

“The need to transform the cleared derivatives post-trade space has been in the making for years and it is now accelerating and gaining real traction, as reflected in the take-up of XTP, our real time back-office platform. We have several customers live on XTP, and many others including Tier 1 banks are now implementing the solution, in line with the need to evolve and be more aligned with the front office technology. “

The move is the latest in a string of acquisitions by ION’s markets division. ION in June completed the acquisition of US-based options firm DASH Financial Technologies after securing the requisite regulatory approvals. Margini says that in Clarus’ case, the nature of the platform will make the transition an easy one.

“One thing that was very attractive is the openness of the Clarus platform. Via their cloud based APIs we can easily bolt their valuation and margin service to the existing ION eco-system," he said. “In a nutshell, we will be able to easily extend our solutions with low implementation and integration hurdles.”

The ability to understand and report margin analytics in real-time will be useful as the fifth and six phases of uncleared margin rules come into effect, capturing a wider variety of firms with swaps exposures that meet a much lower threshold, with a huge increase of the number of entities captured by the rules.

“The final phase of UMR in September 2022, will greatly increase the number of firms captured and many of these are existing users of ION Group products,” Khawaja said. “We will be able to offer these firms an ION solution for UMR, meaning they won't need to rely on new external providers for this regulation.”

The convergence of all these factors make this a compelling opportunity for Clarus, which made its name navigating the OTC markets at a time of unprecedented market structure change.

“The whole Clarus team is staying and we are excited about the both the Data and SaaS opportunity within ION Markets,” Khawaja said. “There is a real need for extending and revamping post-trade and middle and back office services so they more closely resemble the agility of front office technology.”