Chris Daur argues that buyside firms that embrace real-time data solutions will gain a significant competitive edge

London and New York, 16 January 2025

The buyside sector encompasses a diverse range of players from asset managers and hedge funds to pension funds and insurance companies. These firms vary not only in size but also in their financial responsibilities, trading strategies, and regulations. Despite these differences, a common theme is emerging: the need for real-time data insights to optimise operations and deliver maximum returns for clients.

Cost pressures and client expectations push buyside firms to demonstrate clear returns on investment (ROI) at every level of the organization. The manual processes that many of these firms rely on feel increasingly mismatched to the pace of modern markets, and there is an acknowledgment among market participants that firms need to evolve beyond email, spreadsheets, and batch processing.

The buyside is also impacted by the sell-side’s reliance on legacy systems, which can hinder timely data reconciliation and settlement processes. Interestingly, innovation doesn’t always correlate with firm size. Smaller buyside firms, aiming to maintain agility and low headcounts, are often more aggressive in adopting automation to stay competitive, but larger firms are not immune to these pressures, although they may be able to temporarily absorb inefficiencies thanks to their scale.

Meanwhile, incoming regulations around settlement and clearing are driving the buyside to adopt these practices. The US, Canada, and Mexico made the move from two day to T+1 settlement for stocks, bonds, and exchange traded funds. The UK and EU have announced the move to one day settlement by October 2027. With the EU’s patchwork of clearing, settlement and CSDs, this task is even more complex. In the US, the SEC has also mandated clearing for US Treasuries, set to go live on December 31, 2025, for cash trades and on June 30, 2026, for repos.

Real-Time Data: More Than Speed

For larger buyside firms, real-time data solutions like Synergy provide more than operational efficiency—they create opportunities. These firms can encourage sell-side partners, notably their prime broker, to adopt systems that enable real-time access to critical data like EV and custodian information. Because settlement failures can accumulate across multiple partners, impacting balance sheets and funding, every failure matters to buyside institutions.

Forward-thinking firms recognize that the goal of digitalisation isn’t just faster processes, but also reengineered workflows that maximise efficiency and unlock capital tied up in failed settlements. By integrating multiple data flows into unified networks and providing recommendations to solve exceptions based on real-time and past network intelligence, cloud-based microservices like Synergy offer cost-effective, scalable alternatives that streamline operations, allowing firms to reduce reliance on costly legacy systems and the associated maintenance burden.

Evolving Hedge Fund Dynamics

The hedge fund landscape highlights how smaller firms are leveraging innovation to maintain low headcounts and streamline processes. While large funds continue to expand, smaller and emerging managers increasingly outsource specific functions to remain competitive. Many now use comprehensive solutions like BlackRock’s Aladdin to manage risk and post-trade processes.

This consolidation reflects the need for collaboration and data sharing among industry participants. Hedge funds, in particular, rely on trades settling properly to execute short-term positions crucial to time-sensitive trading strategies. Missteps in trade settlement or position management can undermine their ability to capitalise on market trends, highlighting the importance of timely reconciliation between them and their sell-side partners.

The OTC Swaps Market: A Case for Automation

The OTC swaps market vividly illustrates the critical role of real-time data. The gross market value of OTC Interest Rate Swaps contracts was over USD11.68 trillion in the second half of 2023 according to data reported by BIS. While the US market tends to rely more heavily on cash securities, derivative swaps have become increasingly popular for firms outside the US due to their operational simplicity—requiring cash movements rather than physical security settlements—and for the increased leverage they provide.

Swaps positions reset monthly but can remain unresolved for weeks afterwards, accruing balance sheet charges as firms investigate discrepancies. Validation issues in swaps trades tend to arise in the financing leg, where daily interest accruals must align perfectly between counterparties. Reconciliation is often a lengthy manual process as firms need to validate fifteen different fields across each day of the swap period, multiplied by the size of the portfolio. By instituting a shared data network to centrally match transaction details across counterparties and calculate daily netting obligations, firms can minimise late settlements and optimize balance sheet management.

Synergy: A Unified Solution

Synergy stands out as a comprehensive tool for buyside firms, offering cross-product functionality through a single, prime-agnostic interface. AccessFintech is resolving the buy versus build debate for firms because, whether clients prefer a ready-made user interface or wish to build their own tailored solution, the Synergy network delivers real-time data to hydrate client systems, eliminating the need to build infrastructure or collect data from scratch.

For firms leveraging third party platforms, Synergy integrates seamlessly, delivering actionable insights that streamline internal and external workflows without the need to change existing operating models. Access to this data empowers buyside firms to move beyond outdated practices and unlock the full potential of real-time insights.

In a fast-evolving financial landscape, buyside firms that embrace real-time data solutions will gain a significant competitive edge. From reducing settlement failures to optimizing operational workflows, tools like Synergy are redefining what’s possible in terms of efficiency, accuracy, and industry collaboration. By investing in innovation today, buyside firms can ensure they remain agile and effective in the face of changing market dynamics.

Interested in learning more about Synergy? AccessFintech will be hosting two events to celebrate the launch of Swaps Lifecycle Management and bring together participants from across the industry. Get in touch with us at [email protected] to learn more.

Dates:

London: 23^rd January, 2025

New York City: 30^th January, 2025

Event Highlights:

• CEO Update: Join Roy Saadon, CEO, as he shares exciting updates on our Synergy Network and cross asset expansion
• Product Update: Naveen TV Head of Product, and Fabrice Carrier – Derivatives and Swaps Product Owner, discuss the Swap network offering
• Networking Opportunity: Connect with peers from both Sell Side and Buy Side, over drinks in a relaxed setting.