Trema Transaction HUB

Straight-Through Processing (STP) has become a key selling point for all eFX initiatives. This is true regardless of the type of service a customer uses, whether it be a bank’s proprietary portal, a multi-bank portal or an eFX specialist. Other factors, such as pricing, liquidity and research, carry substantial weight. Strong technology and business processing have become increasingly important to the global foreign exchange market.

The multi-bank portals and eFX specialists have been highly proficient at making STP an integrated part of their business offering. They have improved their STP service even further by providing open APIs and by announcing co-operations with major system vendors to provide STP to their systems. Companies now can achieve very efficient STP through a single eFX service.

However, these services are still insufficient because customers use multiple eFX services to cover different markets or instruments and to ensure competitive pricing and liquidity. For example, if a customer trades five different instruments in different asset classes like FX, money market, fixed income, commodity and equity, and uses five counterparties in each, they can be forced to build anything between one (if there existed a multi-bank portal with all instruments) and 25 (if each instrument has its set of banks) interfaces. Even though multi-bank portals would like the customer to trade exclusively with them and access multiple underlying banks, the problem still remains because today’s multi-bank services can only offer a certain subset of instruments e.g. only FX or only bonds. Today, even if a customer trades with only multi-bank portals, he has to build probably 5–10 different interfaces and is still not able to cover all relevant markets.

The cost of multiple interfaces, including the software, implementation and maintenance, is very high due mainly to the lack of standardization and common infrastructure. To be precise, all eFX services have their own APIs. They usually use different formats to describe identical transactions and apply different security standards and ways of communicating. In reality it is not possible to achieve cost efficient STP by integrating individual eFX services.

The service is based on classical distribution theory applied to the financial markets using solutions that Internet technology offers. The service is a multi-bank, multi-instrument, multi-customer solution that will allow many eDealing services to connect to many Finance KIT users using one central, standardized, secure and cost efficient hub solution.

Each eDealing service sends transactions to the HUB through one interface regardless of instrument or customer. Each customer has one access point to the HUB to receive transactions – see picture 1.

The Transaction HUB Service uses state-of-the-art Internet technology including authentication certificates for secure counterpart identification, SSL Protocol and RSA encryption method based on public/private keys. The service receives XML encoded messages from the eDealing application and stores them in a message queue belonging to the subscriber who initiated the eDealing transaction. XML messages, with an open standard format for describing respective transactions, are defined using a Document Type Definition (DTD). This allows the flexibility to add new message types. The HUB Transaction server is located in a secured hosting environment in Stockholm, Sweden.

Multiple advantages
The benefits of the Trema Transaction HUB Service can be divided into three parts, STP, the single point of integration and the connected eDealing services.

STP provides the following benefits:

	1.	Automatic deal entry removes the burden and inefficiency of re-entering deals.
	2.	Real-time (using push) or near real-time (using fetch) updating of positions and risks enables faster and more efficient trading and risk control.
	3.	The possibility of human errors from deal entry is eliminated.
	4.	Increased transaction processing capability.
	5.	Reduction in the need for reconciliation between multiple systems.
	6.	Significantly lower operational risk.

The benefits of the single point of integration include:

	1.	User reduces the number of interfaces to eDealing services to one – regardless of the number of counterparties and instruments.
	2.	The eDealing service reduces the number of interfaces to all Finance KIT customers to one – regardless of the number of counterparties and instruments.
	3.	Dramatic reduction in the cost of creating, implementing and supporting local interfaces.
	4.	Eliminate the need to have multiple interfaces active in parallel to send/receive transactions to/from multiple sources.
	5.	Flexibility to add new eDealing services, customers and instruments in a cost efficient manner.
	6.	Lowers the barrier for users to start dealing with new or specialized eDealing services.
	7.	Lowers the barrier for banks to provide STP for customers that trade less frequently.

In addition to the significant advantages from the single point of integration, the eDealing services will benefit from:

	1.	Opportunity to significantly increase trading volumes with Trema’s customer base.
	2.	Higher level of customer service through the addition of the STP solution.
	3.	Elimination of the negative effect from forcing customers to adapt to external API’s and to pay for the cost of integrating and maintaining their specific eDealing.
	4.	Possibility to reuse the open and standardized protocol in other systems.

Extend the benefits of STP
Companies today can reap the benefits of STP not only within their own organization but can also extend STP to include the market place via eFX services. Trema is a firm believer in eFX and using technology to make business processes highly efficient. The Trema Transaction HUB Service is a new offering, available now, that revolutionizes the integration between eFX, or other eDealing services, and Finance KIT customers. The solution is highly cost efficient and eliminates the obstacles of integrating customers with multiple eFX services.