This week LeapRate spoke with Ronen Kertis, President and CEO of Cappitech, a privately held financial technology boutique. Mr. Kertis has been innovating at the cross-section of tech and finance since 2000, where he’s held CTO roles at ITG Europe and ITG Asia, before serving as CEO of ITG Israel.
Cappitech has expertise in developing FIX hubs, front, middle and back office systems and smart order routing for some of the world’s leading financial institutions. The firm’s successful engagements range from developing global trading systems to client on boarding for ESMA regulation.
The company offers regulatory compliance services for reporting OTC derivatives as part of ESMA’s EMIR (European Market Infrastructure Regulation) reporting obligation, a big requirement now for all European regulated financial institutions and effects many FX brokerages.
Check out the interview below to learn more about the firm.
LR: Can you speak about the trade reporting services you provide to institutions and brokers?
Cappitech: We help companies comply with the EMIR regulation as imposed by ESMA in early 2014. EMIR means that companies regulated in EU that are trading in certain OTC derivatives have to report those trades to the regulator. The report is quite complex in nature and we see many companies struggling to be compliant as a result.
We estimate that as much as 75% of the companies that fall under EMIR regulation still don’t report and hence are in breach of the regulation.
We provide a simple solution to a complex problem. We take the client’s trade data, we validate it, enrich it with required information, format it to the regulator format and report it on the clients’ behalf to a regulated trade repository. We then monitor that all these reports were successfully accepted and if there are any NAKs we handle those. We also offer competitive pricing to our clients given our volume.
LR: Are your main clients dealing in FX trading or you service other asset classes as well?
Cappitech: We service other classes as well. Commodities and equity CFDs, binary options, rates, credit etc.
LR: How does binary options EMIR reporting differ from spot FX or exchange traded FX?
Cappitech: Spot FX actually does not fall under EMIR, but rather FX CFDs. Moreover, clients are under the impression that if a trade opens and closes on the same day (common in binary options) – it does not need to be reported. Our understanding of the regulation is that one needs to report every trade even if it was closed on the same day.
As to differences between FX CFDs and binary options, there are few main ones:
- EMIR is very clear regarding FX while binary options is relatively new to this regulation, and documentation is not as extended as for FX.
- There are some differences in the way one needs to report related to the fact that a binary option has an expiration date as opposed to FX CFD.
- Valuation – sometimes it’s ambiguous as to how to valuate a binary option where FX trade is easier to determine.
LR: Where are most of your clients based, what is their typical profile?
Cappitech: Our clients are based in the main European financial capital cities. Their profile would typically be brokers or hedge funds. Within this community we are appealing more for those who need to report high volume as for them we do not only provide STP, but also significant price improvement.
LR: What is your background and role as the day to day director of the company?
Cappitech: I’ve been in the Fintech business since 2000 and so are many of my colleagues in Cappitech. We’ve been working together for many years. For all those years we’ve been building products and services for the trading community (and still are). We’ve been involved in building trading systems (front & back end), algo servers, FIX networks, middle and back office solutions, including regulatory reporting services. My personal background is technical however, currently I am focused on the commercial side of the business ensuring our clients are satisfied and that our team is continuously motivated and challenged (in a good way…)
LR: Where do you see the future of regulation of the trading business going?
Cappitech: From what we see, it seems like regulation will become even tighter before it will be relaxed a bit again. ESMA already announced that future changes in EMIR (Level 3) are expected later this year. MiFID II is on its way with wide implications.
If I were to give law school students advice, I would tell them to focus on finance compliance and regulation as I suspect this space will draw attention and resources in the next few years.
LR: Please describe Cappitech’s Research and Development division?
Cappitech: Our R&D group is about 30 people strong and is comprised of seasoned and experienced Dev and QA staff. We pride ourselves on the quality of our team and focus a lot of resources and attention to ensure we keep it that way.
All of our R&D staff are university graduates that have been working for a good few years now in the FinTech industry. Just working for Cappitech the team has on average of over 8 years of experience and most have worked elsewhere in the past.
Teams are sized at 3-5 people and are broken into projects and clients. We mostly focus on .NET framework and use C#, C++ in most of our implementations. As a development methodology we practice agile and find it to work very well for us when we partner with other global development teams (typically alongside our client’s R&D team).
To learn more about Cappitech click here.
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