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Reinventing a Structured Product Issuance Platform

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Top tips for re-developing what’s under the hood

Despite the many changes underway in the banking industry, manufacturing of structured products continues to be an essential part of the financial services value chain. Structured product issuers provide attractive and innovative products for wealth managers and financial advisors, whilst simultaneously generating derivative transaction flow and a stable source of funding.

There are a wide range of skills needed to run a successful structured products manufacturing business but we have identified 3 critical components:

  • The ability to innovate carefully designed and properly tested products, suitable for a clearly defined target market, underpinned by strong risk management discipline & pricing capabilities.
  • The capability to support increasing levels of digital connectivity to clients, either directly or via platforms, and meet the demand for more bespoke, tailored structured products.
  • A robust and efficient infrastructure, necessary to support issuance at scale and to handle the increased volume and lower latency demanded by the highly regulated and constantly changing digital business models.

This infrastructure must be flexible enough to cope with the constant product innovation as well as the demands of the ever-changing regulatory and business environment, supported by a specialist workforce who understand the challenges.

Using our many years of experience of developing and managing structured products platforms we have compiled our ‘Top 5’ tips to apply when developing and managing a sustainable issuance platform in the increasingly digital world;

1. There are far better things ahead than any we leave behind

Replacing legacy infrastructure is critical. Legacy tools may have been critical to reducing costs and coping with increased volumes in the past, so replacing them can be seen by some as a zero-sum gain, but building on legacy foundations will be complex, slow and ultimately more expensive

2. Just because everything is different doesn’t mean anything has changed

Don’t just rebuild the tools you have today. Develop a platform, infrastructure and support organisation designed to deliver continuous automation. An efficient platform is not just about the capabilities of the tools themselves, it about the ability to support constant change.

3. Master your strengths. Outsource your weaknesses

Even the largest and most successful organisations focus their efforts and resources on the things that differentiate them. Leveraging external providers for services and infrastructure can help accelerate delivery of a new platform at vastly reduced cost from the mutualisation of the development costs

4. Transparency builds trust

At the heart of the design of any issuance platform should be complete transparency over the processes and controls the platform will provide. Provide platform users the ability to understand the platform capabilities, manage the controls and monitor outcomes.

5. A project is complete when it starts working for you, rather than you working for it

In a world of limited budgets and urgent demands for change, a common path for structured products business managers is to take on more responsibility for delivering the changes themselves. In reality it is extremely hard to deliver real change by squeezing a little extra from the existing teams, regardless of how talented and capable the team are. This can be a false economy and lead to slower, not faster change.