Symphony suspends Sparc pending registration talks with CFTC

Communications and workflows platform provider Symphony has suspended its Sparc offering indefinitely, as the vendor is engaged in ongoing talks with the US Commodity Futures Trading Commission (CFTC) about the service’s registration status, WatersTechnology has learned.

As part of its Symphony Market Solutions suite of services, Symphony Sparc was unveiled in June 2019 as a workflow tool for interest rate and cross-currency swaps, in which buy- and sell-side traders could use a single chatroom for both request-for-quote (RFQ) negotiations and standard messaging. The execution play was a prelude to the vendor’s grander theme of Symphony 2.0, an ongoing rebrand meant to position the company as an end-to-end client- and trade-lifecycle platform, marking a significant move away from a pure communications facilitator.

Now, nearly two years since the presentation of Symphony Market Solutions to the industry, the bundle of offerings has hit a major roadblock.

“Symphony and the CFTC are in current discussions about the registration status of its capital markets solution, Sparc. As a matter of prudence, we have suspended Sparc pending the outcome of those discussions until further notice,” says a Symphony spokesperson.

As those discussions play out, Symphony will have to weigh the risks and rewards of operating Sparc as a swap execution facility (Sef). If it resumes activity as a regulated entity, that could have ramifications for its registration status in Europe, where it might be seen as a multilateral trading facility (MTF). As recently as last year, regulated European venues were already crying foul over Symphony Sparc and tools like it, arguing that this breed of unregulated tech vendors puts them at competitive disadvantages by being able to offer comparable services for lower costs in an agile fashion.

The suspension of Sparc comes amid signs that the vendor was beginning to make headway in capturing a significant network of buy-side clients, a demographic that has been slow to embrace Symphony throughout its rise.  

A survey released last week by The Desk, a publication for institutional investors specific to fixed income, gauged interest in Symphony from 59 major asset managers across the US, Europe, and Asia-Pacific. Despite trading interfaces from Bloomberg, MarketAxess, and Tradeweb maintaining the lion’s share of interest, 5% of respondents said they planned to use Sparc as a trading interface this year. Additionally, though Symphony has no primary market platform, 7% of respondents planned to use the vendor in some way to handle the primary bond issuance process, while Symphony again clocked in at 5% for the secondary markets.

When regulated European venues raised concerns about unregulated entities such as Symphony last year, former general counsel at Symphony, Scott Eisenberg, who left the vendor in January of this year, rebuked their claims, arguing that Symphony’s “bilateral” quality was distinct from the way regulators define MTFs, which involves bringing together multiple parties to transact—hence, “multilateral.”

Conversely, Sparc’s bilateral nature made it “no different than having five telephone conversations going at once,” Eisenberg said.

“Rather than have, say, five different chat windows with your five dealers, you have a single view of the world where you’re engaged in several bilateral discussions,” he added.

An online disclaimer of Symphony Market Solutions was last updated in February this year.

“Any Symphony Service, such as Sparc, that permits customers to negotiate the terms of any financial instrument, is offered, and only capable of being used, on a purely bilateral basis. Symphony has no role or involvement in the negotiation or arranging of any transactions in financial instruments nor in the introduction of counterparties to one another for purposes of entering into such transactions,” it reads.