Droit Financial Technologies, a startup providing enterprise solutions for derivatives trading processes, appointed three industry veterans in derivatives trading to a new advisory board. On Monday, the company announced that ISDA former CEO Robert Pickel, financial technology investor Mark Beeston, and former UBS Group managing board member Seth Cohen will join the Droit Advisory Board, effective immediately.
The advisory board will guide Droit as it delivers real-time solutions to financial institutions that need to meet a complex set of global regulations for OTC derivatives. Droit means right or legal in French. “The name relates to the fact that we help people trade right and trade legally,” explains Satya Pemmaraju, founding partner and CEO of Droit.
The fintech firm was founded in 2012 with a team of veteran derivatives traders, quants, e-commerce specialists, and technologists with front-line experience in products, markets, regulations, and systems. Previously, Pemmaraju was managing director in fixed income commodities and currencies (FICC) at UBS, where he was running a derivatives trading desk for UBS in Stamford, Conn. As a quant, he and his team built most of the fixed income derivatives systems that are in use at UBS.
He co-founded Droit with founding partners Anup Menon, who is CTO, and Brock Arnasan, who is head of product and strategic alliances. Prior to joining Droit, Menon was senior vice president of FICC technology at Barclays and risk technology at Lehman Brothers. Aranson was executive director of fixed income e-commerce at Morgan Stanley. All of the firm’s partners crossed paths at UBS.
Droit was started to address a void in the marketplace that came out of the G20 consensus around regulating OTC derivatives markets. According to the firm’s web site, its mission is to provide clients with robust enterprise infrastructure facilitating the compliant and optimal trading of derivatives across asset classes, regulators, CCP’s, and execution platforms.
“We saw a glaring gap in the marketplace. How do you come to compliant and optimal pre-trade decisions, and how do you make sure post-trade that you have always done the right thing?” asks Pemmaraju. “We unify pre-trade decision making with post-trade compliance reporting by using the same infrastructure, data, and logic.”
In a pre-trade regulatory world, Droit contends that derivatives trading institutions need to be able to answer three basic questions: Who can I trade with? What can I trade with them? Where can I trade with them? Among other questions it answers, is, “How do I transact this on a SEF or not?”
“To be able to trade legally and compliantly, financial institutions need to be able to answer these questions across asset classes, clearing platforms, execution platforms like SEFs -- and across global regulatory regimes, which are interacting with each other in complex ways,” says Pemmaraju.
Droit’s services are broadly classified into two parts: market logic services, related to execution and clearing, and regulatory workflow services. The former can tell someone where they can execute and clear a trade, who the FCMs that can clear it are, and where is the FCM’s given clearing platform. The latter can tell someone what the regulator and mandates in place are, and whether they have clearing, electronic execution, or reporting mandates, for example.
The firm is targeting anyone operating in the derivatives trading space, including dealers and buy-side firms, and has been talking to large asset managers, pension funds, insurance companies, and hedge funds. “What we tell people is what they can trade on a SEF in real time on a pre-trade basis. And post-trade, we tell them if they’ve violated any of the SEF mandates,” says Pemmaraju, adding that Droit provide this for all the G-20 regulatory regimes.
Role of advisory board
Now the firm is looking to heavyweights on its advisory board to open doors and to share their wealth of experience in trading infrastructure, regulations, and financial technology. Having these leading figures on the advisory board “brings us to a conversation with a larger number of platforms in the ecosystem than we had before,” he said.
As CEO of ISDA, the global trade association for derivatives, for more than a decade, Pickel has been at the center of discussions on the nature of the regulatory systems under different regimes. “The robust, global Droit framework positions derivatives users to comply with myriad regulations efficiently and effectively,” commented Pickel in the release. Pickel stepped down as CEO of ISDA in 2014 after working there for 17 years. “This advisory board gives us knowledge of his ideas and thoughts, and gives him a platform to continue his work beyond ISDA,” says Pemmaraju.
With a career spanning 30 years in the financial industry, Cohen retired from UBS Group managing board in 2008 to found Eleven Canterbury, an international consultancy which providing expertise to clients in multiple vertical markets. He held several senior management sales roles with UBS’s foreign exchange enterprise, and has built organizations of scale. “He has seen how the regulatory shifts and the market have influenced derivatives trading in the FX world,” says Pemmaraju.
A former Deutsche Bank executive, Beeston has more than two decades of experience as a trader and COO within the banking world. He is currently CEO and founder of Illuminate Financial Management, a fintech venture capital fund specializing in the capital markets space. Previously he headed the post-trade and Information division of ICAP including Euclid Opportunities, ICAP’s early stage investment business.
“As a management group and as a firm we are very excited to be working with them. They will play a very significant role in our growth,” says Pemmaraju.Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio