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Capitolis Enters Into Agreement to Acquire LMRKTS to Expand Its Industry-Leading Optimization Suite and Accelerate Growth

Capitolis, the SaaS-powered network that efficiently links global market participants to new sources of capital in a regulatory-sound manner, today announced that it has entered into an agreement to acquire LMRKTS, an industry-leading multilateral optimization and compression provider.

The proposed acquisition is scheduled to close in the month of August, subject to certain closing conditions. Already a market leader in bilateral compression, structured financing solutions, and novations, this proposed acquisition will allow Capitolis to provide banks, asset managers, and hedge funds with the broadest and most complete trade compression solutions available in the market.

Capitolis, which combines deep markets expertise with a Silicon Valley mindset, has a rapidly growing client roster of more than 100 leading global financial institutions. These clients utilize Capitolis’ innovative technology platform to seek out opportunities to free up capital without taking on additional risk. As part of the proposed transaction, the LMRKTS team will join Capitolis, enhancing the depth of the company’s optimization talent and its ability to bring additional capabilities, including multilateral compression, to the market. Terms of the deal were not disclosed.

“At Capitolis, we are well on our way to meeting our audacious goal of transforming capital markets, guided by the tremendous demand we continue to see from the world’s most significant providers of capital,” said Gil Mandelzis, founder and CEO of Capitolis. “With the addition of the fabulous capabilities Hilary, Sandeep, and the LMRKTS team have built, we will unlock even greater opportunities to expand our product suite and enhance our technology. Together we move one step closer to a transformed, safer, healthier, and more efficient market.”

“I am extremely proud of the company we have built at LMRKTS and very thankful to our clients and the LMRKTS team whose support has made us a leading multilateral provider in foreign exchange,” said Hilary Park, co-founder and CEO of LMRKTS. “When Sandeep Karkera and I started LMRKTS together with Lucio Biase over eight years ago, demand for network-based optimization services was just starting to accelerate. We have since seen firsthand the far-reaching impact that Capitolis has had on the marketplace over the past four years and know that as one team we will deliver truly exceptional results for our clients. Capitolis shares our vision for the future of capital markets, and we’re proud to be joining forces with them.”

“As a client of both Capitolis and LMRKTS, we are delighted to see them team up and look forward to working with the combined entity moving forward. Capitolis is bringing truly innovative solutions to capital markets, and we support the firm’s ambitious vision for the future,” said Itay Tuchman, Global Head of Foreign Exchange at Citi.

This acquisition follows Capitolis’ recent completion of a $90 million Series C funding round led by Andreessen Horowitz, as well as a string of strategic appointments over the past year, including Stuart Wexler as General Counsel, Jimmy Reilly as Head of Equity and Total Return Swaps Funding Solutions, Jen Vanderwall as Chief People and Culture Officer, and James Kibbe as Head of Structured Funding Origination.

Next-Gen Best Execution: Capital Optimization

It is easy to think of best execution in simple terms, such as was best price hit.

But in reality, the subject is much more complex and involves market impact, signaling risk, and of course benchmark. Those are all front office metrics, but true best execution takes in the total cost of the trade, meaning a look across the entire lifecycle. Nowhere is the cost of trading more critical than in the use of capital, especially in the age of Uncleared Margin Rules (UMR). Learn more about how capital optimization is the next generation of best execution.

CLICK HERE to read the full article in e-Forex Magazine.

Capitolis Appoints Industry Veteran and Market Structure Thought Leader Stuart Wexler as General Counsel Amid Continued Growth

Capitolis, the leading SaaS platform that drives financial resource optimization for capital markets, today announced the appointment of Stuart Wexler as its general counsel.

In this role, Wexler will oversee legal matters, corporate governance, and regulatory affairs, and advise senior leadership and the board of directors.

Wexler joins Capitolis with more than 25 years of legal and regulatory experience across financial services, previously serving as Group General Counsel for NEX Group (formerly ICAP), where he was responsible for the management of legal, compliance, risk, and government affairs functions globally. Prior to NEX Group and its predecessor firm, Wexler was a Managing Director and Head of Sales and Trading Compliance at Merrill Lynch, where he managed a department of compliance professionals responsible for providing compliance advisory support to the company’s Americas Sales and Trading businesses. Most recently, he served as a legal consultant for the Federal Reserve Bank of New York and was a member of the Treasury Market Practices Group for more than a decade.

“I am thrilled to work with Stu again, having seen him operate at the highest levels of professionalism and integrity over the course of his career. His understanding of the regulatory environment is unparalleled,” said Gil Mandelzis, CEO and founder of Capitolis. “Stu cares deeply about the health of the financial system and is a perfect partner for us as we reimagine the markets to become healthier, more vibrant, and safer for all participants,” Mandelzis added.

“I am excited to play a key role in growing a company that is truly transforming the industry,” said Wexler. “I joined Capitolis because I believe their vision is revolutionary and will foster a more efficient marketplace that also embraces the spirit and letter of the regulations that have been put in place over the last decade. I look forward to adding to the strong foundation that this talented team has built.”

Wexler’s hire follows Capitolis’ recent completion of a $90 million Series C funding round led by Andreessen Horowitz as well as a string of strategic appointments over the past year, including Jimmy Reilly as Head of Equity and Total Return Swaps Funding Solutions, Jen Vanderwall as Chief People and Culture Officer, and James Kibbe as Head of Structured Funding Origination.

Capitolis Novations Posts Record Transaction Volumes in Q1 2021, Adds New Clients and Functionalities to Platform

Capitolis, the leading provider of SaaS and structured financing products that address balance sheet management for financial institutions, today announced that Novations, its foreign exchange novation platform, achieved a record transaction volume of more than $959 billion in notional for FX options novations during the first quarter ended April 30, 2021, more than doubling the volume from a year earlier.

Many financial institutions expanded their positions in the FX market during the periods of volatility brought on by the COVID-19 pandemic, and they turned to the Capitolis platform to open them up to further opportunities in the market without adding risk. Trading volumes continue to hold at record highs, making the demand for Capitolis’ analytics and tools stronger than ever across both buy-side and sell-side institutions.

“The Capitolis platform is a truly groundbreaking technology that enables the world’s leading prime brokers, executing banks, hedge funds, and money managers to more effectively interact and manage their balance sheets, unlocking the potential to completely transform how firms trade with one another,” said Ben Tobin, Senior Vice President, Global Head of FX at Capitolis. “The growth of Novations over the past year has been tremendous, and we look forward to continually expanding to support our existing and prospective clients with solutions that meet their complex balance sheet needs.”

In addition to achieving record volumes, Capitolis has added 11 clients to the Novations platform since August. These new clients, across both the buy and sell side, complement a growing roster of more than 75 leading global financial institutions currently active on the Novations platform, including NatWest, Citi, HSBC, Standard Chartered, Nomura, and Societe Generale. Since its inception nearly three years ago, Capitolis Novations has eliminated positions of more than $4.6 trillion in notional.

To support the growth of Novations, Capitolis has added key features for an improved user experience, including enhanced functionalities that simplify the movement of FX instruments between prime brokers and the larger marketplace, and advanced analytics on the status of all pending and completed novations.

The growth of Capitolis’ Novations platform follows the recent completion of a $90 million Series C funding round led by Andreessen Horowitz. Capitolis further bolstered its positioning in the FX space earlier this year, announcing a partnership with leading FX settlement provider CLS to streamline trading and settlement for banks in the $6.6 trillion global currency market.

FX Trading Efficiency In The UMR Era

The success of an investment or trading decision is dictated by the market outcome, especially for those tasked with producing returns. Increasingly, however, trading firms must better understand the cost implications of the trade they are about to make – particularly if they are trying to outperform a peer group with a similar investment strategy.

This will be critical since, in September 2021, the threshold of Uncleared Margin Rules (UMR) drops to embrace firms with over $ (or EUR) 50 billion in exposures as measured by Average Aggregate Notional Amount (AANA). This is a significant change that puts many more buy-side firms in scope. Further reductions planned for September 2022 will affect smaller buy-side firms with AANA of $ (EUR) 8 billion.

As a result, in the next 18 months, a large proportion of buy-side firms will join the small group that has already started in-depth analysis of their trading portfolios with the aim of optimizing them to either stay below or minimize the impact of, the UMR threshold.

Evaluating market options
For some, clearing and the use of futures instead of OTC FX markets offers the potential for capital optimization and a solution to UMR. However, while these options reduce settlement and counterparty credit risk, they are not without their own challenges:

  1. Not all FX market participants want to clear, especially if their business model involves physical delivery of funds.
  2. The cost of clearing is now more likely to be passed through to the customer, rather than being included by the sell side into the spreads they charge. Thus, the total cost of clearing remains a little-known, potentially significant variable for the buy side that is unlikely to diminish until scale is achieved.

For many participants, perhaps the most important drawbacks are reduced liquidity and the ability to accurately hedge exposures within the futures market. In non-roll months, average daily volume in FX futures and options is around $70 billion per day, a number dwarfed by the $6.6 trillion traded in OTC FX markets every day.1 And, since futures trade to fixed settlement dates, accurate hedging is more difficult for many buy-side firms, who are often unwilling to accept basis risk.

Driving capital efficiency
For the majority of firms who prefer to trade in OTC FX markets, one solution is gaining access to compression and novation services. These services also directly reduce settlement and counterparty credit risk by allowing buy-side firms to eliminate positions via a risk or riskless compression, resulting in a cleaner book overall and a lower exposure to UMR-driven costs.

Optimizing capital can also further enhance an institution’s liquidity profile by allowing it to move exposures between counterparty institutions, expanding their network to include regional banks with strong balance sheets and appetite for balance sheet exposure with minimal market risk. This results in a reduction of concentration risk through an optimized, risk- and cost-efficient allocation process.

The twin needs for trade and counterparty optimization highlight the benefit of a network and platform solution that can identify and support optimization across a broad set of counterparties using a seamless and automated process. This creates new business efficiencies along with specific cost benefits that can help to meet regulatory requirements such as UMR. The bottom line should be a discernible improvement in net performance for trading and execution desks.

Achieving UMR readiness with better technology
In June 2020, a survey by State Street2 found that just 19% of firms likely to be in scope of the next two phases of UMR were fully prepared for compliance. This suggests that firms may still be considering a realignment of their business to meet the challenges. The good news is that the solutions outlined above would allow these firms to adopt a new technology-driven approach to fully capitalize on the benefits of compression and novation, while continuing to operate existing business models with minimal disruption.

For buy-side trading desks, the challenge of UMR also offers an opportunity to leverage the advances in technology and data services from recent years. Solutions designed to improve execution performance can now be tuned to include capital optimization.

With smaller books but the same market risk profile, firms will immediately benefit from a portfolio perspective. However, there are also opportunities to incorporate the expected capital impact of a trade into the smart order router to drive additional efficiencies.

The next generation of trading efficiency combines the skill of the traders with innovative technology and overlays it with operational – specifically capital – optimization. Smart order routers have changed the face of some trading desks; smart capital optimization will further accelerate that change. With optimization solutions already available and data highlighting the benefits of such an approach, the impact of any change will be minimal to the buy-side trader. However, the benefits – in terms of improved bottom-line performance – could be significant.

1https://www.bis.org/statistics/rpfx19.htm

2https://www.statestreet.com/content/dam/statestreet/documents/Articles/UMR%20Infographic.pdf

 

Capital Optimization: Next Generation Best Execution

Uncleared margin rules, or UMR, will dominate the conversation of buy-side firms in the same way that transaction cost analysis (TCA) and best execution gained prominence leading into and following the advent of MiFID II in 2018.

In September 2021, the steady creep of UMR into financial markets takes another step forward. The threshold drops to $ (or EUR) 50 billion as measured by Average Aggregate Notional Amount (AANA). This is a sizeable drop from the current $ (EUR) 750 billion and puts many more buy-side firms in scope. Further reductions planned for September 2022 will affect smaller buy-side firms with AANA of $ (EUR) 8 billion.

UMR will increase focus on AANA, creating incentives to monitor limits and maximize efficiency to enhance performance to the greatest degree possible. In short, capital optimization will become the next generation of best execution.

The search for opportunity
TCA helps buy-side dealing and execution desks optimize and streamline their trading processes by adding, or saving, crucial performance points for investors. Technologies and systems have been explored and integrated into the buy side, achieving cost savings, and supporting regulatory compliance.

Now, that same potential exists to enhance performance and realize cost savings by efficiently using the capital resources allocated to trading. The sell side, which has been subject to regulatory changes for some time, has largely embraced this concept. As more and more buy-side firms come into scope for UMR, it is their turn to focus on better workflow processes to help optimize the use of capital.

The business case for capital optimization extends beyond regulation, however. Although these firms have improved execution processes, these can be enhanced further to provide better access to deeper liquidity and reduce the actual cost of doing business – both for the firm and their counterparties. They can do this by reducing their gross or net notional outstanding, reducing settlement risk, and easing concentration risk among counterparties using techniques such as novation and compression.

Most importantly, embracing better workflow processes around the use of capital sees the firm reduce the line items in portfolios while maintaining market risk levels. The opportunity for returns is undiminished, but the cost of achieving them is mitigated by reducing the capital costs assessed against the desk.

Optimization becomes a pre-trade imperative
The good news for investment firms is that much of the optimization framework is already in place and available for adoption. Once manual and onerous, the process is now automated, proven and easy to implement. In fact, the technology is already being used by a large swathe of the sell side who represent a large proportion of any fund’s major counterparties. Adoption by the buy side creates further significant optimization benefits.

At many firms, operational efficiency has historically been viewed as a post-trade objective, but technological innovation creates opportunity for the trading business to embrace it in the pre-trade space. Where funds previously may have asked about the robustness of a liquidity stream or the ability to straight-through process after the trade, now they can ask about capital optimization before dealing.

Capital management and concentration risk remain critical
Technology can also help with the growing issue of concentration risk given the shrinking number of counterparties available to buy-side firms. Workflow solutions enable these firms to broaden their counterparty “panel” and alleviate the pressures of concentration risk; however, this can only be done in a collaborative fashion and requires a central ‘marketplace’ for sell- and buy-side firms to connect to help each other reduce their capital footprint. Whether through compression or by shifting exposures to regional banks with strong balance sheets and spare capacity, optimizing capital will be a significant focus for the buy side in 2021.

The good news is that such a shift involves less heavy lifting for the buy side than it might first appear. The increased automation of the trading business – most recently advanced by the increased use of algorithmic strategies and Software as a Service (SaaS) – means that often solutions are about connectivity rather than hardware. Mostly, a new mindset is required – one open to the opportunities afforded by the smarter use of capital as part of an operational shift, and willing to embrace new technology solutions to automate continuous optimization.

Traditionally this has been the domain of senior management or the back and middle office, but as sell-side traders can tell their buy-side brethren, UMR means capital charges allocated to the trading business have become something for everyone to focus on. Best execution is no longer about hitting the best bid and offer; just as smart order routers driving the algo strategies have shifted the relationship landscape for traders, so too capital optimization will change how they think and operate.

Whichever way one looks at it, the buy side is going to have to get serious about capital optimization. Fortunately, new technology solutions are available to help them.

Capitolis Appoints Callie Reynolds as Chief Customer Officer Amidst Record Growth

FinTech platform expands executive team with new hire focused on leading the team that will deliver core services to company’s growing and diverse customer base.

Capitolis, the leading SaaS platform that drives financial resource optimization for capital markets, today announced the appointment of Callie Reynolds as its Chief Customer Officer. Reynolds, who will lead Capitolis’ global customer success, including its global post-sales efforts, is the latest addition to the company’s growing executive team.

As Chief Customer Officer, Reynolds will develop the strategy and lead the team that delivers Capitolis’ core services to the company’s growing and diverse customer base, with a strong focus on customer satisfaction/retention and growth in adoption. Reynolds’ addition comes amid strong momentum for Capitolis, as the company continues to experience industrywide adoption of its proprietary technology platform.

With extensive experience in SaaS and an exceptionally strong background in customer success and account management, Reynolds joins Capitolis from Oracle, where she served as Vice President of Account Management for the Oracle Data Cloud division. In this role, she oversaw the support, adoption, and value exchange for the Measurement suite of solutions. During her time at Oracle, she was also named by New York Business Journal as one of its 2020 Women of Influence honorees.

Reynolds joined Oracle through its 2017 acquisition of Moat, an enterprise SaaS solution delivering analytics that measure viewability, attention, and brand safety across the digital advertising landscape. While at Moat, she served as Vice President of Account Management and grew the account management practice from its infancy into a global, cross-functional team, expanding across the U.S. and opening customer success centers in London, Sydney, and Singapore.

“We are thrilled to welcome Callie to Capitolis. Her deep expertise in the SaaS industry and strong track record of success make her an ideal fit to contribute to a rapidly growing business like ours,” said Gil Mandelzis, CEO and founder of Capitolis. “This year has presented us with a tremendous opportunity to accelerate the adoption of our innovative platform, and we look forward to continuing this momentum into 2021.”

“I’m excited to join a groundbreaking SaaS platform, with a world-class team, that’s truly transforming the way financial institutions utilize their balance sheets,” said Reynolds. “I look forward to partnering with Capitolis’ market-leading client base and bringing my SaaS experience to Capitolis to drive continued growth and enhance the company’s operational excellence.”

Capitolis, which helps financial institutions free up capital and remove barriers that would otherwise restrict trading, enables firms to optimize their balance sheet exposures through collaborative technology by eliminating unnecessary positions and finding the most suitable party to hold the remaining positions. The company has eliminated $5 trillion in overall positions to date for more than 50 financial institutions, including many of the world’s largest banks, as well as leading hedge funds and asset managers.

The announcement comes on the heels of a number of key executive hires in 2020, including Lindsey Baptiste as Senior Vice President of Finance, Hen Lotan as Chief of Staff, and Rahul Auradkar as Chief Product Officer. The company also recently announced its plans to grow its headcount from 50 employees at the beginning of 2020 to 90 employees by year-end

Markets Media: Capitolis Aims to Double Client Roster After Securing Strategic Investment

Capitolis, which recently announced the completion of a strategic investment from Citi, J.P. Morgan and State Street, aims to double its client roster over the next 12 months.

Capitolis CEO and Founder Gil Mandelzis told Markets Media that Capitolis expects significant growth in volume on its proprietary technology platform over the next year as financial institutions seek innovative and collaborative partners to help them optimize their balance sheet exposures.

To read the full article CLICK HERE.

Capitolis Announces Two Senior Hires to its Executive Management Team Amid Continued Growth

Fintech platform appoints Lindsey Baptiste as SVP of Finance and Hen Lotan as Chief of Staff following further industry adoption of Capitolis’ proprietary technology.

Capitolis, the leading SaaS platform that drives financial resource optimization for capital markets, today announced the appointment of two senior executives: Lindsey Baptiste as Senior Vice President of Finance and Hen Lotan as Chief of Staff.

These new hires will support Capitolis in its next phase of growth and play a key role in advancing the company’s mission to transform the capital markets through its collaborative technology and platform. Baptiste will oversee all finance activities, including financial planning and analysis, accounting, treasury, systems and billing, as well as support corporate governance. Lotan will manage Capitolis’ strategy, process and business performance, analyze strategic opportunities and measure business outcomes.

Baptiste joins Capitolis following key roles at both startups and large financial institutions. She started her career at Morgan Stanley in equity capital markets before expanding into fixed income capital markets over the course of five years. She then worked at MediaMath, Inc., a fast-growing AdTech startup, where she held positions in revenue and professional services operations, and served as the international head of finance. She saw the growth of the organization, from a small startup to a well-established, international company.

Prior to joining Capitolis, Lotan spent eight years with Boston Consulting Group, where he served as Principal and a lead member of the firm’s financial institutions practice, spearheading a variety of growth strategy and large-scale change engagements and crafting strategies to capture opportunities that leveraged new technologies. He also led the firm’s thought leadership research group – the BCG Henderson Institute – where he managed the development of BCG’s intellectual property on technology and strategy. Before BCG, Lotan served as a senior associate at KPMG Somekh Chaikin on their valuation services team in Tel Aviv.

“I am thrilled to welcome Lindsey and Hen to the Capitolis team. Their expertise will be instrumental as we continue on our high growth trajectory and reimagine capital markets for the benefit of all market participants,” said Gil Mandelzis, CEO and founder of Capitolis.

The new hires follow a year of record growth for Capitolis, which includes the recent completion of a strategic investment from Citi, J.P. Morgan and State Street.

Gil Mandelzis Discusses Future of Fintech in SALT Talks Interview

Capitolis CEO and Founder Gil Mandelzis recently participated in an engaging SALT Talks digital interview with Michael Weisz, Founder and President of YieldStreet, and Anthony Scaramucci, Founder and Managing Partner of SkyBridge.

In the interview, Gil offered his views on a variety of topics including the evolving relationship between financial institutions and technology providers, regulators’ thoughtful approach to innovation and the key role that fintech will play in the future of financial services.

With the acceleration of technological adoption driven, in part, by the COVID-19 pandemic, Gil expects financial institutions to focus on opportunities for collaboration with fintech partners and increasingly work with firms like Capitolis to become much more efficient in the way they utilize their balance sheets and other financial resources.

CLICK HERE to watch the full discussion.