RegTek.Solutions Forges Regulatory Reporting Partnership with Deutsche Boerse

Blog entry

RegTek.Solutions has formed a strategic partnership with Deutsche Boerse (DB) to deliver a certified testing and pre-validation service for clients of its ambitious new Regulatory Reporting Hub – the latest move in a major drive by the exchange to dominate the European regulatory reporting landscape. The deal represents the start of what is expected to be a substantial series of collaborations between the two organisations, as they combine their expertise to kickstart DB’s global goals.

DB has already been on a serious expansion drive over the past year as it seeks to capitalise on Brexit uncertainty and overtake London Stock Exchange (LSE)-owned LCH Clearnet as Europe’s leading clearing house. The German exchange operator reported a 15% jump in third-quarter group revenues and a 10% increase in net income, with particularly strong performances from its OTC clearing business (which saw revenues jump 123%) and its Eurex clearing house, which processed €4.3 trillion in Q3, up from just €315.9 billion the previous quarter. CEO Theodor Weimer has since confirmed that the group is actively seeking new M&A opportunities – with fixed-income, commodities, foreign exchange and data all key areas of interest.

To support this activity, the exchange has underpinned its expansion with an aggressive move into the regulatory reporting space: seeking to leverage its existing data handling capabilities into a one-stop-shop assisting clients to meet the onslaught of global regulatory reporting requirements of the past decade. Its Regulatory Reporting Hub was first launched in 2017, bundling all the Deutsche Boerse solutions for regulatory compliance onto one platform serving both buy-side and sell-side clients as well as corporates and trading venues. The exchange reports to 25 National Competent Authorities (NCAs), covering multiple regulations.

So where does RegTek.Solutions come in?

The relationship first started well over a year ago, when DB partnered with the software solutions provider and its parent company, consultancy firm Risk Focus, to provide key system components for the Regulatory Reporting Hub’s OTC Trade Reporting solution, including RegTek.Solutions’ Validate.Trade product.

In September 2017, DB joined forces with London-based VC investor Illuminate Financial to pump US$5 million into RegTek.Solutions. “While we have already been working with the team for some time to enrich our Regulatory Reporting Hub, the investment will help us deepen our relationship with RegTek.Solutions and enable the firm to service clients required to validate, report and reconcile trade data,” says Ankur Kamalia, MD & Head of Venture Portfolio Management and DB1 Ventures at Deutsche Boerse, at the time of the deal.

Last week’s partnership announcement marked the first official collaboration since the investment – offering over 2,300 clients of DB’s Approved Reporting Mechanism (ARM) service access to RegTek.Solutions new pre-validation platform. The solution will add enhanced testing and data quality remediation capabilities, as well as pre-submission validations, for all transactions destined for any of the 25 NCAs to which DB is connected. It is pre-configured to incorporate regulators’ expectations on data format and content in addition to DB’s API specifications, and will support a broad range of validations including regulation-specific validations, repository acceptance criteria, messaging standards, enhanced quality validations, and best practice. It will also enable firms to write and customise their own proprietary rules, avoiding a one-size-fits-all scenario.

“We are now able to offer our clients an additional service, which pre-validates their data before being sent to the Regulatory Reporting Hub. The result is a significant improvement in the quality of data we receive and submit for validation,” says Georg Gross, Head of Regulatory Services at DB. “The pre-validation process will allow our clients to identify any deviation from ESMA’s guidelines even earlier in the life cycle of their transactions.”

This kind of work is nothing new for Rektek.Solutions, which already offers a similar service to other reporting venues, although not necessarily on the same basis. For example, it has a solutions agreement in place with the Depository Trust & Clearing Corporation (DTCC) in the US, helping clients with the integration, quality and accuracy of data that goes into the DTCC’s global trade repository. But the DB deal represents collaboration on a higher scale.

“This partnership is different because we are getting an advanced level of integration with DB,” says RegTek.Solutions CEO Brian Lynch, speaking to DMR this week. “They are helping us to maintain the service level around the product, and they are working with us to actively push it out to market – it is a much closer relationship than the deals we have in place with other venues. It is not officially exclusive, but it is certainly unique.”

A key benefit of the partnership is the range of coverage it provides. The two firms come from opposite ends of the spectrum: RegTek.Solutions is a software provider that is able to put solutions directly into the clients’ hands and work on their side of the fence – assisting them to aggregate, extract and identify data and improve the quality of their reporting. They can then deliver that data to the DB hub, a central service provider that offers a pure utility function and manages the larger-scale integration across NCAs.

“Between the two of us we can span the entire scope of the reporting challenge, so together we make a very fine team,” says Lynch.

RegTek.Solutions also offers the advantage of global scale, with a strong North American footprint around Dodd-Frank and Canadian trade reporting for OTC derivatives as well as an established presence in Australia, Japan, Hong Kong and Singapore. Although DB is currently primarily Europe-focused, the group is already taking steps to expand out into new markets – witness the launch on November 1 of its brand new European Energy Exchange (EEX) in Singapore as part of a bid to revamp its Asia business – and RegTek.Solutions could certainly help along the way.

So although the validation engine might be the first collaboration between the two firms, it is unlikely to be the last – and going forward we should be able to expect plenty of further activity.

“There is an incredible amount of synergy between what we do and what DB are aspiring to achieve,” confirmed Lynch. “This is just the first step in many opportunities to collaborate. Our entire suite of tools is complementary to the Regulatory Reporting Hub’s goals, so we certainly expect to continue the relationship and build it out over the course of the next year.”