Trading as a Service: A New Approach to Risk Management

How to improve the quality of corporate governance using trading solutions available through SberBusinessAPI.

What is the quality of corporate governance?

The ESG agenda, which includes the principles of a responsible approach to the environment, the social sphere and business management, has become one of the main vectors of Sber’s strategy until 2023. At the same time, changing the credit policy towards green lending and responsible investment is not the only way to implement the ESG principles.

The SberCIB team has successfully developed and implemented trading algorithm solutions, which will become available to the bank’s clients in the future. By providing access to our technologies, we help corporations improve operational stability by automating liquidity and currency risk management. The introduction of such technologies can directly affect the quality of corporate governance of a company, this is just the third factor in the composition of ESG.

It would be a mistake to assume that the ESG agenda is relevant only for the largest public companies. Improving the quality of company management means increasing the efficiency of working with resources, reducing operational risks and automating routine processes. Such changes can improve the financial performance of any business, not just those waiting for an influx of “green” investments.

What’s in the box”?

Our goal is to create a “boxed” product that embodies the concept of trading as a service (trading as a service). This is a module connected to the Sberbank trading system via SberBusinessAPI. It allows you to automate the management of market risks. In the future, user companies will not need their own trading or even the treasury, because algorithms will be able to perform their functions.

Most companies use standard and popular IT solutions, such as 1C. And our products were originally conceived for the simplest possible integration with them. We want to become not only a trading partner, but also a technological one – we are ready to advise the client at the stage of planning the architecture of digital interaction with the bank. The earlier the dialogue starts, the better and easier integration we can provide.

Such integrations free up client resources for the main business tasks, and ready-made solutions allow you to automate the routine. Many clients have systems that aggregate information about all foreign exchange income and expenses, and foreign exchange transactions. But few vendors provide out-of-the-box hedging automation solutions based on available information. The creation of such a system is associated with significant infrastructure costs that accompany any algorithmization. We believe that we can significantly reduce costs at this stage. Thus, automation projects will become more attractive, which means that companies will be able to increase their efficiency at a lower cost.

How can SberBusinessAPI help save client resources?

Independent developments created by corporate IT departments to solve such problems are quite expensive. It is necessary to support the exchange and off-exchange infrastructure, adapters for data exchange between different systems, build modules for aggregating exchange rates and making deals. This is a rather complex architectural solution, which can become a serious burden on the IT infrastructure even for a large company.

For most companies, managing liquidity and foreign exchange risk is not their core business. Here, Sberbank can act as a specialized partner, ready to provide its solutions, infrastructure, knowledge and trading experience. At the same time, we help not only directly with the management of the currency position, but also with post-trade processes, with trade analytics and data analysis.

Now SberCIB is implementing several pilots and is pleased to invite clients to carry out the following projects. We are currently working with a number of companies, including representatives from the financial and manufacturing sectors, who are interested in trying firsthand how trading and treasury operations can be automated. For example, companies in the financial sector that operate on the foreign stock market, but do not have their own currency trading, are forced to submit currency orders to the exchange. The foreign exchange market is not limited to the stock exchange. The turnover on the OTC market significantly exceeds what we see on public markets. But, unlike the stock exchange, complex and expensive technological solutions are needed to conclude transactions on the “interbank market”. Such investments can only be justified with a large volume of transactions. In addition to algorithms, complex analytics is needed to conclude transactions, which helps to control efficiency. It allows you to optimize the parameters of the trading system based on the history of operations.

For example, in a situation where the system is waiting for $10 million to accumulate (and this can happen only by 8 pm, when market liquidity is already declining), our solution allows us to track this and recommend the client to split the deal into 10 equal parts. Then transactions will overlap during the day, and with better market liquidity, the client will receive the average daily price, and not the one that was formed by the evening.

Creating a specialized TaaS-platform (trading as a service) and outsourcing qualified trading expertise is our goal in the field of automating clients’ trading operations. The goal for 2021 is to conduct a number of successful pilots with several companies from different industries and market segments and prepare ready-made boxed modules for scaling.

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