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Opening up trading platforms to third-party providers is a step well worth taking: It is the only way to give clients access to products tailored to them with maximum price transparency.
As I explained in my last article (to learn more, read “Amazon, Airbnb and friends make their way into investment banking”), platform ecosystems play a big role in the digitization of investment banking. Vontobel has been investing heavily in these kinds of systems for years. It launched its first platform, deri-pricing, 14 years ago. This single-issuer platform (SIP) was developed to automate the production process and the entire process chain for structured products in order to cut production costs and make the business scalable.
However, a simple platform is not an ecosystem until it is opened up to competitors, i.e. third-party providers. They give clients a genuine choice of products tailored to their needs.
One such multi-issuer platform (MIP) is deritrade. We opened it up to other issuers six years ago as part of our drive to enhance and improve deri-pricing. Many financial institutes had developed in-house platforms of their own. However, unlike our platforms, most were intended for in-house distribution – in other words, the products were sold by the banks’ own investment advisors.
Vontobel started out in the broker business, so providing services for other banks makes up a large portion of its business. In investment banking, for example, we distribute most of our products to professional investors who are looking to buy Vontobel products for their clients. Most of the clients on our single-issuer platform, in other words, were external clients (B2B4C). At that point, it only made sense to open up the platform to outside issuers and turn our single-issuer platform into a multi-issuer one.
It was not easy to make that decision six years ago. We knew we were inviting competitors onto our platform and cannibalizing parts of our business. Today, we have eight issuers on deritrade and, with every day, become more and more convinced that this approach is the best one because it meets a valuable client need: to provide the best possible service by providing a wide range of products from different issuers that clients can buy at the best possible price.
Customized structured products from different issuers can be simulated and subscribed with a single mouse click by clients who visit deritrade. The head-to-head comparisons vastly improve price transparency and thus returns. Digitization drives personalization—and not just in banking, either. In the end, deritrade delivers exactly what clients expect: investment products that adapt to clients, and not the other way around.
Head Vontobel Investment Banking