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Torstone Tackles Post-Trade Processing, Risk and Reference Data with Inferno

Torstone Technology has launched a new post-trade processing platform, using the software-as-a-service model. Torstone’s Inferno system aims to reduce middle and back-office costs while improving risk and reference data management with a solution tried and tested at Belgian banking group KBC.

The software behind Inferno was originally developed and is used by KBC Group, and was bought by Torstone in a management buy-out after the bank was bailed out by the Belgian Government in 2009 and sought to divest non-core business. The software was part of the bank’s Financial Products group, which provided back-office technology to the bank as well as to external clients.

The buy-out included 22 development and support staff as well as ongoing contracts with KBC Bank, a further unnamed bank and an unnamed broker, allowing Torstone to open for business on January 1, 2012, with a small client base, headquarters in London, offices in New York and Hong Kong, and staff to support existing and new clients.

The company is employee-owned and existing client work made it profitable from day one. Brian Collings, Torstone chairman and chief executive, says the company already has five leads for Inferno, two looking particularly promising, and expects new business will eclipse existing, but growing, contracts over the next 12 months.

His expectation is based on Inferno’s ‘all in one’ back-office capability that includes enterprise level clearing, settlement and integrated accounting; support for multi-asset, multi-currency and multi-location operations; and the ability to handle high volume transactions, including high frequency trading.

Products already processed through Inferno include equities, bonds, convertible bonds, reverse mortgages and warrants, and equity, foreign exchange, insurance, credit and fund derivatives. Key connectivity is to Swift and Crest, with data feeds coming from vendors including Bloomberg and Thomson Reuters, and integration available with bespoke front-office solutions as well as with systems from vendors including Fidessa, Murex, Sungard and Sophis.

Addressing risk, Inferno consolidates data from best-of-breed front-office solutions to support risk management applications and reduce operational risk through delivery of consistent data for reporting. The solution also includes a centralised reference data database that is used to map both internal and external data and create a single copy of clean data.

Collings explains: “Inferno was born out of the shortcomings and inflexibility of other settlement systems to meet the processing requirements of a wide range of instruments, complex trades, multiple venues and very high volumes. People are asking whether it has now become more cost effective for the back office to invest in one application that can address all needs, rather than maintain disparate solutions. The pressure is also on back-office systems to take information from the wide range of specialist front-office trading systems and provide a comprehensive and cohesive view of business performance and exposure to risk. Inferno is right for today’s challenges.”

Collings acknowledges that multi-asset, multi-currency and multi-location functionality is standard in many middle- and back-office solutions, but suggests Inferno’s differentiators lie in its broad back-office coverage, ability to consolidate data, support for high volume trading and its provision as an SaaS solution. The software replaced five single products in the middle and back office at KBC, he says.

Collings also recognises that budget pressure means few, if any, firms are able to scrap and replace complete middle and back-office systems. Instead, he says: “We are realistic that our next group of clients will be adopting Inferno as a point solution that has the potential to take on more asset classes and execution venues longer term.”

While the software is implemented at KBC and Torstone’s other bank client, it is used as an SaaS solution by the company’s broker client and it is this model of the software that will be promoted, although Collings does not rule out implementation altogether. “Firms are looking at the individual costs of systems, but using the SaaS model Torstone can host the systems and firms can cut infrastructure and communication costs, effectively cutting operational costs,” he says.

Torstone will initially target regional and mid-sized investment banks, asset managers, hedge funds and brokers in the UK, US and Asia where it already has offices. It expects any competition to come from Broadridge with its Gloss solution in the US and from GBST with Syn in Asia. The UK market, Collings suggests, remains fragmented, with many organisations relying on systems built in house.

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