This Week: Clear Street, AXA/AWS, TD Bank/Google Cloud and more

Clear Street launches clearing for market-makers 

Clear Street, a New York-based prime broker, has launched professional clearing services for registered market-makers in listed US equities and options, marking the first successful entry into the professional clearing market in nearly a decade.

Clear Street, founded in 2018, is a member of 29 US listed equity and options exchanges and was recently approved by the Options Clearing Corporation to provide clearing services to registered options market-makers. To offer these services, Clear Street has built a proprietary, cloud-based clearing system that’s scalable and quick to respond to market dynamics, says Kevin McCarthy, chief administrative officer and head of clearing at Clear Street.

Speaking to WatersTechnology, McCarthy says there is “tremendous demand” for additional and alternative liquidity providers. Clearing and broking services are typically operated by major banking institutions, and consolidation over the past two decades has pushed many small clearing firms out of the market. The effects of this consolidation are especially potent in options markets, where there are very few non-bank entities that clear for options market-makers. Optiver became the first in FX options in 2021.

“Clients want to have an opportunity to [have access to] other liquidity providers and other sources because they feel there’s too much concentration risk,” McCarthy says. “They’ve lost their power to negotiate. They feel very locked up by these providers, and that they don’t have the ability to diversify their portfolios.”

Many banking oversight rules and regulations don’t directly effect clearing, but because the majority of clearing firms sit under banks, they must meet them anyway, even if doing so is incongruent with firms’ growth and innovation strategies, McCarthy adds, which can adversely affect customers.

This launch follows a successful third tranche of the company’s Series B funding in December 2023. Led by Prsym Capital, the raise increased Clear Street’s Series B to $685 million and the firm’s valuation to $2.1 billion.

McCarthy, who spent nearly 27 years in various roles at Bank of America Merrill Lynch and an additional 12 at Bank of America, hopes to exit the year with three to five market-makers using Clear Street’s platform.

“I would be exceptionally happy,” he says.

Nasdaq, Celent propose new approach to cloud adoption for FMIs

A new report published by consultancy Celent and Nasdaq proposes a new approach to cloud adoption among financial market infrastructures. The pair found that when FMIs analyze whether to adopt cloud, the standard total cost of ownership equation (comparing cloud to on premises) does not account for the opportunity cost of missing out on the next wave of market evolution.

As they consider next steps, FMIs should look beyond lift-and-shift approaches in favor of embracing a cloud operating model, the report said. The TCO calculation for this business transformation, however, can look expensive versus existing on-premises solutions. But the unique factors affecting FMIs require a more refined equation that accounts for opportunity costs of FMIs doing nothing while markets and members pass them by on their technology journeys, it continued.

Cboe Clear Europe secures support from BofA, State Street for launch of securities financing transactions clearing service

Cboe Clear Europe, Cboe’s Amsterdam-based pan-European clearing house, has secured the support of additional participants to brace the launch of its central counterparty (CCP) clearing service for securities financing transactions (SFTs). Bank of America and State Street have committed to supporting the service from launch, which is expected during Q3 2024, subject to regulatory approvals.

Their commitment brings the total number of launch participants for the SFT clearing service to nine, comprising a range of key market participants, including banks, clearing firms, asset managers and custodians. Other participants include ABN Amro Clearing Bank, BNY Mellon, Citi, Barclays, Goldman Sachs, and JP Morgan.

This new service is expected to introduce matching, CCP clearing, settlement and post-trade lifecycle management for SFT transactions in European cash equities and ETFs. The service, should it be approved, will be available to principal lenders, special participant lenders (UCITS and non-UCITS) and borrowers, with settlement taking place in 19 European Central Securities Depositories.

By offering access to a CCP clearing and settlement service for SFTs, Cboe Clear Europe is expected to help clients address these new regulations—such as Basel III endgame and Basel IV—reduce their risk-weighted assets exposures associated with bilateral SFTs, and help support the growth of this market.

Axa and AWS developing the global B2B risk management platform

Insurance and asset management provider AXA and Amazon Web Services are jointly building the new Axa Digital Commercial Platform (DCP) and associated software services to enable increased risk management capabilities.

Axa DCP is a risk management platform that combines industry, business, and environmental data with geospatial analytics and generative AI technologies, and it aims to help clients monitor their assets and navigate complex and interconnected risks, including natural disasters, supply chain disruption, and cyber threats.

By leveraging AWS analytics capabilities, Axa intends, over the next two years, to make available numerous services for existing clients and for millions of AWS global clients through the AWS Marketplace and the AWS Data Exchange.

To deliver DCP, Axa will use Amazon Bedrock, a service that offers several foundation models from AI companies, to provide corporate clients with real-time data and analytics, including historical datasets to identify and assess factors that could disrupt operations or impact reputation, safety, security, or financial performance.   

These insights strive to boost Axa’s risk prevention services—as well as underwriting and claims experts—to better predict outcomes and mitigate risk when developing insurance products.

TD Bank and Google Cloud ink multi-year strategic partnership

TD Bank Group and Google Cloud have entered into a multi-year strategic relationship that will see TD add Google Cloud services to its portfolio of technology solutions to support its delivery of banking services. Google Kubernetes Engine already supports TD Securities Automated Trading (TDSAT).

Google Cloud will work with TD to help streamline application development and deployment and enable the bank to respond quickly to changing customer expectations by rolling out new features, updates, or new financial products. TD will benefit from Google Cloud’s engineering support, which includes Google’s global network of engineers.

TDSAT, a Chicago-based subsidiary of TD Securities, began using Google Cloud’s infrastructure with the goal of delivering technology automation and quantitative modeling to fixed-income markets. Leveraging Google Cloud, the TDSAT team has constructed a research platform that scales alongside the business, supplying the technology required to process large research workloads.

European Central Bank selects Tradeweb to supply electronic trading platforms

Tradeweb Markets, a global operator of electronic marketplaces for rates, credit, equities and money markets, has been awarded two contracts to provide electronic trading platforms (ETPs) to the European Central Bank (ECB) and other Eurosystem National Central Banks (NCBs), after successfully participating in the procurement procedure organized by the ECB. Tradeweb also won the tender to supply ETPs to the ECB in 2015, when the central bank last conducted a similar bid process.

Specifically, Tradeweb has been awarded two contracts covering the provision of ETPs for trading: EUR-denominated bonds, including European government bonds, covered bonds, corporate bonds, repo, deposits and certificates of deposits; US Treasuries; Japanese government bonds; USD- and EUR-denominated SSA (supranationals, sovereign and agency) bonds; and USD- and JPY-denominated interest rate swaps.

The term of the contracts is four years with the option to extend twice for an additional two years.

Clearwater Analytics acquires risk models from Wilshire for $40 million

Clearwater Analytics, a provider of SaaS-based investment management, accounting, reporting, and analytics solutions, will partner with Wilshire Advisors and acquire its risk and performance analytics solutions.

Clearwater is adding Wilshire AxiomSM, Wilshire AtlasSM, Wilshire Abacus, and Wilshire iQComposite, which provide fixed-income analytics, equity analytics and performance measurement, accounting, and GIPS compliance support analytics, respectively. The company will merge them with its own risk and performance analytics platform to create a unified product for customers.

The partnership, which will be co-branded as Clearwater Wilshire Analytics, will allow both companies to provide enhanced analytical capabilities for investment managers and institutional asset owners such as public pension plans, insurers, foundations, endowments and more. The new Clearwater Wilshire Analytics platform will help clients calculate performance and risk attribution, assist with security-level portfolio construction, uncover new strategies, access portfolio models, and identify investment opportunities.

The acquisition is expected to close in the second quarter of 2024, subject to customary closing conditions.

Borsa Italiana completes migration to Euronext’s Optiq platform

Euronext, a pan-European market infrastructure provider, announced the completion of the migration of Italian derivatives trading to Optiq, the third and final phase in the migration process of Borsa Italiana’s markets onto Euronext’s trading platform. The migration was completed fewer than three years after the acquisition of the Borsa Italiana Group.

The integration of Borsa Italiana’s markets onto the Optiq platform ensures a single trading environment and access to a full suite of services for investors and issuers. 

Euronext remains on track to deliver the expansion of Euronext Clearing to Euronext listed financial derivatives and commodities derivatives by Q3 2024. Together with the migration of Italian derivatives to Optiq, the move aims to contribute significantly to reaching the targeted €115 million synergies by end of 2024.