“Know Your Broker” Technology Workflows are on the rise

Bill Stephenson, CEO of Plia, and Mike Bellaro, CEO of the Plato Partnership, discuss the benefits of a centralised web portal, including a wide range of data management, trend analysis, and comparison over time.

Bill Stephenson, CEO of Plia

The practices adopted by investment managers for their due diligence processes with counterparties have evolved rapidly in recent decades. What once required tedious spreadsheet management is now possible through a centralised web portal, allowing for a wide range of data management, trend analysis, and comparison over time. Amongst the leading industry solutions is Plia, the KYB (“Know Your Broker”) platform. Following its sale by Trade Informatics in late 2019 and its collaboration with the Plato Partnership since early 2020, Plia has seen a significant uptick in equity and foreign exchange clients. Bill Stephenson, CEO of Plia, shared his experience: “Having been an early adopter of Plia when I was at Franklin Templeton, I saw firsthand the importance of having a systematic and comprehensive way to document, review, and engage with our trading counterparties to ensure best execution. There are no shortcuts when it comes to understanding your business and your partners as an investment manager.”

Mike Bellaro, CEO of the Plato Partnership

During the pandemic years, asset managers (AMs) sought to streamline risk management and trading workflows for an increasingly distributed workforce. Stephenson, added, “The initial chaos of 2020 and the transition to remote work seemed to slow the adoption of KYB products. But we were able to gain market share in late 2020, as trading teams recognised how Plia’s KYB features could help them manage, compare, and improve their relationships. The endorsement we received from Plato Partnership as a preferred provider on the European continent for KYB and KYC products was a major step forward.” Mike Bellaro, CEO of the Plato Partnership, remarked, “At Plato, we’ve been committed to modernising the European marketplace and fostering better communication between the buy-side and sell-side. Plia’s features have been tailored to the specific needs of our membership, and it will continue to evolve in line with the changing demands of the marketplace.”

In addition to the heightened importance of collecting data on counterparties, AMs are diligently exploring how their brokers execute trades on their behalf, as well as the potential conflicts of interest that could arise. To prevent these conflicts from influencing decision-making, transparency and a detailed understanding of the situation are paramount. Modern KYB systems offer one such solution, allowing users to grade, rank, and spot outliers across all counterparties – a complex process that necessitates specialised expertise and an in-depth understanding of market structures. By leveraging such platforms, firms can reduce risk and better protect their interests.

To supercharge new features in KYB, Plia is taking the initiative and proactively engaging more with market participants and trade organisations to boost the communication between both sides of the Street, globally. While tailored questionnaires were devised and created by the industry to foster discourse on best practices in 2020, those practices are ever-changing. Furthermore, new areas of concentration are gaining traction for KYB providers, such as the effect of ESG principles on best execution.

Anita Karppi, a strategic advisor and advisory board member to Plia, commented, “We are thrilled to have launched an ESG product that complements our KYB platform, which is beneficial to AMs, and their vendors, broker-dealers, and other partners. As ESG continues to rise to the fore, Plia ESG is positioned with a unique solution.” The prior year saw an uptick in enthusiasm for ESG by AMs, vendors, exchanges, and broker-dealers. Karppi added, “It is reassuring to see market-driven initiatives arise in this critical arena over the past year. There has never been such widespread interest and agreement on one subject and it is beneficial for all the stakeholders.”

Sparked by the introduction of KYB platforms and the adoption of standardised questions, the financial marketplace is now experiencing a leap forward in efficiency and accuracy. Not only are AMs able to ask the right questions with ease, but brokers and counterparties can effectively manage their responses and databases with enhanced speed and accuracy. Chris McConville, managing director at Kepler Cheuvreux, described the process as “a major step forward,” noting, “The introduction of the Plia European Standard Questionnaire has reduced the due diligence process from over a month to a few days – a remarkable achievement in such a short time.” With improved technology and streamlined processes, the financial industry is now ready to experience a new era of success and growth.

Once a niche process, KYB has become mainstream for the financial industry with Plia leading the charge. With over 60 active clients and £25+ trillion of assets under management, the platform is now trusted by some of the world’s largest investment banks and AMs. Dave Lauer, CTO of Plia, said, “We have built our technology to be the most secure and our communication protocols to ensure durability.” Stephenson added, “We invest in both functionality and security to keep Plia best-in-class and accessible to all industry participants. Any KYB platform must be flexible and resilient to meet the demands of the industry.”

The ever-evolving world of trading and market structure is only going one way – increased complexity and new challenges. As a result, continuous education is essential to ensure an enduring, healthy ecosystem. To that end, the transparent sharing of business practices is the key to helping market participants stay ahead of the curve. KYB platforms will continue to gain momentum as AMs seek a higher level of clarity and their counterparties look for more streamlined and efficient processes to meet the diverse needs of their clients.