Pirum has been on a mission to deliver automation and operational efficiency to the securities finance post-trade lifecycle, helping users to reduce settlement fails and to eliminate manual touchpoints across post-trade workflow, including margin and collateral management.
When fully applied, the London-headquartered global solutions vendor claims average STP rates above 99 per cent across the trade lifecycle for securities lending, repo and synthetic transactions, a figure that is thought to be well above that of competing post-trade solutions and which offers strong opportunities for clients to reduce operational risk and cost.
The development pipeline looks healthy, with the addition of a voluntary corporate actions solution to its CoacsConnect platform scheduled for later in 2024. This represents the latest contribution to the company鈥檚 front-to-back securities finance lifecycle and collateral management solutions platform.
鈥淲e have a clear thesis,鈥� says chief executive Philip Morgan, 鈥渨hich is borne out of helping clients meet their regulatory requirements, raise their profitability and reduce operational risk in the SFT lifecycle by eliminating trade fails, STP breaks and reconciliation errors.鈥�
鈥淲e are excited by the growth prospects for the coming three to five years,鈥� adds chief revenue officer Jacob Koopmans. The company is investing in developing its penetration in North America, including strengthening its New York office with the appointment of Frank Seibold, head of commercial development, Americas, who joined in February. 鈥淭here is more to come in months ahead,鈥� says Koopmans. 鈥淲e are extending our coverage geographically, with clients able to support their international activity via a global end-to-end post-trade platform.鈥�
For Morgan, Pirum is a post-trade financial technology specialist that in some ways predated fintech and software-as-a-service (SaaS), growing up in the latter stages of the dot-com boom under the tutelage of founder-owners Jeff Armstrong and Rupert Perry, but with a business culture and a development vision that differed significantly from the speculative investment path pursued by some tech firms formed at that time.
Morgan joined the organisation in 2016 as chief commercial officer, having previously held senior roles in prime brokerage, collateral management and clearing at Nomura, Lehman Brothers and J.P. Morgan. He took on the role of chief operating officer two years later, before being promoted to chief executive in August 2020.
With private equity involvement, and with changes to the management team, Morgan explains that the business culture of the firm has shifted to a more customer-led approach.
鈥淧irum in its early phase offered excellence in SBL technology development, driven by a talented group of developers and engineers,鈥� observes Morgan. 鈥淚t generated brand recognition and trust among customers that it could deliver high-quality solutions in the post-trade space. This established a springboard for the commercial team to extend the customer base, to expand the product set and to industrialise the offer,鈥� he says.
Growth path
Over the last seven years Pirum has rolled out a number of widely adopted new product streams. CollateralConnect offers an integrated view of clients鈥� collateral inventory and allocation across global business activities and product areas, supporting intraday collateral movements and projections and enabling optimisation and the most efficient use of available collateral.
With the implementation of the 麻豆传媒 Financing Transactions Regulation (SFTR), Pirum released a SFTR solution, working closely with S&P Global (at that time operating as IHS Markit) to bring this service to market. This now forms part of Pirum鈥檚 RegConnect suite of regulatory reporting services and is employed by over 150 institutions.
In November 2021, the company released Trade Risk Manager, helping clients to manage the February 2022 implementation of the settlement discipline regime provisions of the Central 麻豆传媒 Depositories Regulation (CSDR). This offers a centralised dashboard, providing users with a near real-time view of trades status, flagging trades at risk of failure and associated fail penalty costs, along with indicators of counterparty exposure and reporting mismatches.
Having built a comprehensive post-trade solution suite for securities lending trades, the company is extending parallel efficiency benefits for repo transactions. The release of RepoConnect in February 2022 enables users to match and confirm repo transactions and support automated processing of downstream lifecycle events.
鈥淥n balance, Pirum has demonstrated a strong track record of bringing new products to market, particularly in the securities lending space where we can offer an end-to-end STP solution. The focus now is on promoting wider usage and adoption of this suite of services, while developing product coverage for repo and synthetics鈥�, Morgan adds.
In 2016 Five Arrows, the private equity arm backed by Rothschild bought into the company. Subsequently, the company has gone through two further phases of private equity ownership. London-based private equity specialist Bowmark Capital led a buyout in April 2019.
In December 2021, the software and services investor Hg Capital bought a stake in Pirum as a co-investor, sharing control with Bowmark Capital, with Pirum鈥檚 management team also retaining a shareholding in the business.
Crossing continents
As the securities finance business has grown, and as clients have become more global and complex over that journey, Morgan observes that it has been important to add experienced individuals in key positions to sustain the growth plan. 鈥淚n bringing on board Jacob Koopmans in September 2023, we have appointed a specialist with decades of experience in structuring international sales and marketing teams to best reflect our clients鈥� activities and expectations,鈥� he says. 鈥淭his is what we needed to get the optimal trajectory for our product development and global deployment.鈥�
Seibold鈥檚 appointment is a natural extension of that process in the US office 鈥� joining from CME Group where he was previously global head of strategic relationship management and head of cash market sales 鈥� complementing the existing subject matter expertise in the US sales team.
In February, Boston-based independent lending specialist eSecLending announced that it has adopted Pirum鈥檚 Recalls Manager solution to support automated management of loan recalls 鈥� thereby reducing the risk and resource overhead associated with this core element of SBL lifecycle management and supporting the firm in its preparations for the transition to T+1 equities settlement in the US, Canada and Mexico from late May 2024.
鈥淲hile the reduced settlement cycle will demand increased efficiencies from securities lending to avoid market disruption, our pre-existing process of direct communication with our clients鈥� investment managers and increased processing automation from tools such as this Pirum product will allow us to accommodate the changes required to meet the expectations of both our lending and borrowing communities,鈥� says eSecLending鈥檚 head of global operations Larry Albaugh.
This was followed a few weeks later with the announcement that BBH will be implementing Recalls Manager to prepare its clients for the shift to T+1 timelines. Pirum indicates that further similar announcements are in the pipeline.
Competitive dynamics
In a competitive vendor segment, 麻豆传媒 Finance Times was interested to explore where Pirum identifies opportunities for revenue expansion and extension of its product coverage. Currently, Pirum does not offer an SFT electronic trading platform and it does not currently serve as a commercial data vendor for the SFT marketplace.
鈥淧irum has some very large vendors as competitors,鈥� says Koopmans. 鈥淏y comparison, we remain small and nimble as a service provider. We do not aim to be active in every segment across the SFT transaction lifecycle. It is important that we do not lose our specialist focus and over-diversify the product set, thereby adding risk to project execution and overextending the range of areas in which the company must invest.鈥�
Pirum has built a trusted network that has grown through its ability to deliver in the post-trade segment, Morgan proffers. 鈥淩ather than asking us to launch an MTF service, clients are prioritising areas where Pirum could assist them by delivering additional connectivity 鈥� providing a centralised link to clearing houses, for example, where a single link into Pirum will enable the client to connect to multiple clearing locations.鈥� This will be particularly important with the SEC push for mandatory clearing for UST cash securities and repo trades 鈥� and the associated push for the extension of central clearing internationally.
鈥淭hat connectivity can be post-trade, for example in the clearing space, but could also be pre-trade, for order routing and potentially in supporting trade negotiation,鈥� adds Morgan.
鈥淭hrough our customer focus groups, we believe there is limited value for Pirum in spinning off another MTF,鈥� he suggests. 鈥淗owever, with event-driven investment opportunities developing in the market, clients are eager to have fast routes to execution and simplified links to key market infrastructure.鈥�
More broadly, the company is focused on how customers can draw greater benefit by deploying the Pirum product stack more fully and effectively. To propagate this goal, it has formed a Customer Success group which will go live later this year.
鈥淭hrough deploying the full suite of Pirum products, clients have demonstrated matching rates of 99.8 per cent STP and that is an industry-leading metric,鈥� comments Koopmans. However, other firms using Pirum鈥檚 services are currently operating with STP rates in the mid-80s.
鈥淲e estimate that this 14-15 per cent delta in terms of STP rates could save multi-million dollars in terms of cost savings,鈥� says Morgan. The Customer Success team will play an important role in consulting with users on how they can adopt the product suite more effectively 鈥� automating tasks that they currently do via email or spreadsheet, and by applying Pirum solutions to a wider range of operational inefficiencies. Beyond technical changes, this will also centre on helping firms review their operational risk and their approaches to change management.
Pirum has evolved substantially from seven or eight years ago when it simply had a single post-trade services solutions set, explains Morgan. Regulatory transitions have provided a focal point for the company in adding new solutions and an incentive for customers to adopt new products. In other cases, Pirum鈥檚 solutions address longstanding points of operational risk and inefficiency across the trade lifecycle. For example, the CoacsConnect service provides automation across corporate actions processing, enabling standardised and automated communication across issuer, agent, custodian and loan counterparties to monitor and process entitlements and voting activity via a single client portal.
Pressure testing
In parallel, the industry places a high premium on resilience and protection from cyberthreats. 鈥淚t is vital to ensure that the front door is secure,鈥� explains Koopmans. But, in the event of a security threat, it is also essential to have contingency provisions in place to restore normal operations from a company鈥檚 backup facilities. 鈥淎s part of our journey as a private-equity owned fintech company over the past decade, we have spent significant resources on improving our defence and resilience capabilities,鈥� he adds.
While the ransomware attack on a major SFT vendor on 22 January reinforces the need for firms to invest in sound defences and to monitor the attack surface for points of vulnerability, Koopmans highlights how this cyber event has also revealed a spirit of mutuality and collaboration across a vendor community determined to minimise disruption to service users. 鈥淣obody within the securities finance industry benefits from a security breach of this kind,鈥� says Koopmans, and the industry has demonstrated that it can come together to ensure swift resumption, while working together to draw lessons that will inform future best practice across the industry at large.
In transitioning to cloud-based services, for example, Pirum has been able to draw on experience within Hg Capital, which has assisted with helping multiple companies in which it has an ownership stake to migrate applications to a cloud services platform. Hg and Bowmark have also offered expert advice to Pirum with regard to managing resiliency and cybersecurity strategy.
鈥淎s a team and across our product suite, we are subject to thorough diligence on our project ideas and product launches, requiring that we have pressure tested each of the proposals that we put before the board for evaluation,鈥� says Morgan. 鈥淲e have shareholders that know what good looks like and quite often they may suggest alternative ways of looking at a problem. This has been influential in shaping our development approach across multiple projects.鈥�
The success that Pirum has achieved in its new product development, he suggests, reflects the detailed design discussions and evaluation that these have gone through prior to approval. Before taking ideas to the board, there is an expectation that these have been thoroughly pre-tested with the market. The result has been a product strategy that combines client-driven, user-informed development with a strong command of technical process.
In closing, Morgan highlights the advances that Pirum has made on its journey to automate manual workflows in the securities finance sector and to bring greater efficiency across the SFT lifecycle. In doing so, it has evolved over the past 10 years from a Europe-based disruptor in the securities finance industry to drive for a global leader position in post-trade automation and collateral management solutions.
鈥淭wenty-four years after setting down the road of automating post-trade services, the company has set down a new marker,鈥� he says. 鈥淎fter launching a SaaS service before the term was invented, rolling out product after product and constantly learning from clients, partners and investors, Pirum鈥檚 product suite now covers the entire post trade space for SBL and repo as well as collateral management and optimisation. The Pirum team, including the veterans and recent arrivals on both sides of the Atlantic, are eager to continue writing this new chapter for the company.鈥�
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Image: Philip Morgan and Jacob Koopmans 