Compliance and regulatory reporting platform vendor b-next has recently signed an agreement with Interactive Data under which the data vendor will provide global pricing and reference data to feed b-next’s MACOC software solutions. The deal is part of the German vendor’s ambitions to crack the UK market and should help it in the effort to streamline and simplify compliance processes via the provision of consolidated data, says Wolfgang Fabisch, founder and CEO of b-next Group.
b-next’s MACOC software solutions are focused on proactively managing and identifying market abuse, conflicts of interest, insider trading and customer specific best execution results via an enterprise wide compliance tracking dashboard. Interactive Data will therefore be providing b-next with static, business entity, corporate actions and class actions data, as well as ratings and classifications in order to feed into its compliance dashboard.
“Our alliance with Interactive Data provides us with a wide range of financial information and further reduces the amount of manual processing, enabling a more proactive approach,” explains Fabisch.
The vendors have been in discussions about the agreement for around six to eight months, he says, and the decision was motivated by customer requests around consolidated data for best execution purposes. The partnership was also cemented via the close relationship of Fabisch with a former colleague from a previous role who now works for the data vendor. It is a non-exclusive partnership, however, and b-next indicates it will consider the addition of other data sources if its clients are keen for that to happen.
Fabisch puts the interest in such a consolidated source of data down to the fact that the market has become so fragmented post-MiFID. “Financial institutions used to be able to go to exchanges to get their consolidated tape but with more and more volumes going to alternative execution venues, such as multilateral trading facilities (MTFs) and dark pools, it is really not possible for firms to get the data they need in the same manner as before,” he elaborates.
This is where data vendors have carved out their own niche: they can collect and consolidate this data from the growing list of trading venues in the market and provide it as an alternative to a consolidated tape. Bob Cumberbatch, director of European business lines for Interactive Data Europe, explains: “Fragmentation in the market has meant that firms cannot go to one place in the market to get the whole universe of trades for one particular equity and vendors such as ourselves are helping to put Humpty Dumpty back together again. We track data on data sets such as ISINs for equities and normalise the formats of this data in order to provide it to the market.”
The lack of data standards in the market is both a challenge and an opportunity for these vendors as it means extra work to track down and fix the data but it also means a greater return. Accurate data is an important foundation for b-next’s solution and this has been the main driver for choosing what Fabisch describes as a “trusted and reliable source” for its reference data.
The vendor’s home market of Germany has proved very receptive to the b-next solution and over the last 20 years, the vendor has bagged a large percentage of the banking community as clients. The buy side has also taken an interest over the last couple of years, adds Fabisch. “In the last six months there has been massive interest from the buy side in Germany due to the ongoing regulatory changes in the market, especially related to market abuse identification,” he explains.
The SocGen fraud last year in particular sparked a wave of investment in compliance tracking software, he continues. The b-next solution, with its ability to dig down into the problems and closely monitor any violations, has therefore proved popular, claims Fabisch.
The vendor has even got the German regulator on board as a client. b-next has just completed a project to connect Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) to the Committee of European Securities Regulators for reporting purposes, he explains.
b-next’s success in the German market notwithstanding, the UK poses a significant challenge to the vendor. The appetite for compliance and reporting solutions has certainly increased this year as a result of regulatory change, but firms are under the cosh of serious budget cutting and therefore heavily scrutinise any kind of investment in vendor solutions.
Fabisch reckons the biggest challenge the vendor will face is letting the market know who b-next is and why they should choose its solutions over others on offer. b-next’s main competition within the continental European market is Italian vendor List Group, which provides a governance, risk and compliance platform. List also has offices in London and has used its traction in the front office and trading market to expand its ambitions over time to the compliance space with its GRC Evolution solution. b-next will therefore need to differentiate itself significantly on functionality from this offering in order to succeed outside its home market.
Fabisch is, however, confident that the vendor’s experience in the market will show through. The German market’s appetite for compliance solutions is seemingly higher, but UK firms seem to be keen to see the business benefits of monitoring things such as best execution, he says. “There seems to be a much quicker response from UK firms and they ask the same questions of our solution as German prospects but from a different point of view. The German market is more focused on the details of the compliance solution in terms of specific functionality, whereas the UK prospects have been more keen to see what the solution can deliver for the firm overall and to its management,” he explains.
Business benefits and competitive edge are key factors in the UK market in a time of great challenge and this is where b-next will be pitching its solution. The next 12 months should indicate whether they have any hope of success.