These remain early days for e-trading platforms in the Americas' structured products markets. But in Societe Generale Corporate & Investment Banking's (SG CIB) recently launched Alpha SP platform - with its market-leading speed of pricing, huge range of underlying instruments and support from SG CIB's large cross-asset sales team - users believe they have a glimpse of the future.
"They are definitely the leader in the industry," says one structured products executive at an advisory firm. "Alpha SP provides the fastest quote - at 20 or 30 seconds or so - and it allows you to do multiple quotes at once. It gives me mobility and malleability - it's just a major time saver."
Distributors praise the ability the platform gives them to create, price and execute structured products for offshore, non-US clients in Latin America in real time. But more importantly, it is already helping its broker clients to sell more products: the adviser adds that since she began using Alpha SP, among other platforms, she has increased the volume of structured products business she writes by 80%.
The platform rollout has also necessitated major changes to the way in which SG CIB manages its structured products business, says Arnaud Davoust, head of cross-asset pricing for the Americas at SG CIB in New York. "Behind the IT are structural changes to the organisation that go way beyond the client being able to click and produce prices. For example, we now have credit products online. There are no observable prices in the market, so to be able to quote live prices and be aggressive for our clients involves changes to the whole chain, from engineers to traders to the back office."
Similarly, while speeding up pricing from one minute to 10 seconds may seem like an incremental change, it necessitated a huge research and development project in order to change the scripting and language SG CIB uses to price products, he adds.
We've helped decrease issuing costs, allowing users to trade smaller notionals and therefore capture smaller clients. That’s the direction the market is heading in
Likewise, the platform's ability to offer much smaller transaction sizes necessitated a shift in the way the bank's traders approach product hedging. "To issue and correctly manage the risk when you have a lot of small tickets requires you to change the way you macro hedge. And to still be profitable when issuing small notionals and still be aggressive, you need to be efficient from a middle- and back-office perspective."
The genesis of Alpha SP dates back to 2009, when the bank identified a strong demand for automated pricing of its more vanilla structured products post-crisis, says Emmanuel Valette, head of cross-asset solutions for the Americas at SG CIB. "We wanted to avoid mispricing as much as possible in order to make us more reactive to our clients, to lower costs and become more competitive," he says.
It took SG CIB three years to bring the first iteration of the platform to market and another year or so to launch Alpha SP. The offering is built on three pillars, says Alix Dupuy, Paris-based e-commerce sales co-ordinator at the bank. "The first is that it's cross-asset, because we want to offer the widest range of products possible," she says. The platform allows users to structure 15 types of note referencing 1,500 underlying instruments across single-stock and equity indexes, commodities and credit.
The second pillar is based on saving clients time, she says, noting that it takes an average of 18 seconds to price an autocallable note and an average of eight seconds for reverse convertibles. Alpha SP also allows users to price and trade products in the secondary market, she adds.
The third pillar is the marriage of seamless processing with post-trade efficiency. "This helps to decrease issuing costs, allowing users to trade smaller notionals and therefore capture smaller clients. That's the direction the market is heading in," says Dupuy.
A surprisingly big challenge in developing the system lay in building the architecture to support trade documentation, she says. "It was very complicated to finalise the term sheets, final terms and pricing supplements, with different templates for each distribution country, different languages and disclaimers, and so on. Building flexible documentation is key."
For all the work behind the scenes, it is the client experience that counts - and SG CIB customers report an intuitive, user-friendly interface, backed up by solid sales support. "It's very easy to use and easy to navigate," says a senior executive at one New York-based distributor.
He also praises the intuitive workflow with which the system instantly generates term sheets for each prospective trade, providing a valuable tool for his own sales team. Also singled out is Alpha SP's secondary market capabilities, which include support for live trading. "That's huge," he says.
Not only does the secondary market blotter show structured products trades the client has conducted through the platform, it also harnesses its integration with SG CIB's middle- and back-office systems to show historic trades, says Dupuy.
The week on Risk.net, July 7-13, 2018Receive this by email