Structured Products: Putting an End to Data Chaos

• 

  Susan Niederhöfer
  Chefredakteurin

While infrastructure is a topic that rarely made headlines in the past – data and connectivity are now seen as strategically important for Structured Products. Why is that?

Tara York: What has changed is the sheer scale of the market. Structured Product volumes have exploded across issuers, markets and distribution channels, as has the number of manual handoffs across that chain – from issuer to platform to distributor. At Luma, we are active across the entire chain and we see the same problem from both sides, with issuers having to reformat the same data over and over again and distributors reconciling term sheets or risking missing a lifecycle event. Either way, this shows up as cost and risk, and once that affects the end client, it also becomes a problem of trust. That is why data and connectivity have now moved from a back-office concern to a boardroom topic.

Francesco Marcon Fiastri: Yes, the growth of the market was certainly the decisive factor here. A key challenge with Structured Products is gaining efficient, standardised access to terms and conditions after a trade so the client can book the product quickly using high-quality data. The current scale of the market means a high level of automation is of key importance. CONNEXOR allows Structured Product data to be delivered in machine-readable format, both at issuance and throughout the product lifecycle, to meet the need for standardisation of the buy side and the sell side.

What creates the most pain today – competing data standards or the high number of manual handoffs?

Marcon Fiastri: The main pain point is the lack of standardisation as it creates a lot of complexity along the value chain. If a platform like Luma wants to onboard an issuer, that issuer often has to adapt to a new format or application programming interface (API). And the same product data needs to be sent to multiple places – platforms, data vendors and the custodian for settlement – often using different standards. CONNEXOR consolidates that process: the issuer sends the data once in a standardised form and we take care of forwarding it to the different platforms, which can process it automatically.

Advisers have been complaining about fragmented product data for years. Is that still primarily due to a technology gap or has it become a lack of incentives?

York: A few years ago, there was indeed a genuine technology gap. The tools needed to standardise data of varying issuers on an institutional level did not exist. That problem has now largely been solved technically. What has not yet been resolved is the incentive problem: A sufficiently large part of the market would have to agree that a shared infrastructure offers more advantages than controlling its own data pipeline.

CONNEXOR and Luma are already running a reference data and lifecycle partnership spanning Europe and the US. What is a bank now in a position to do as a result of this collaboration that was impossible a year ago?

Marcon Fiastri: Our collaboration means that issuers can use the same infrastructure and the same standard for Switzerland, Europe and Asia and, since 2025, also for the US. Since Luma is a prominent multi-issuer platform in the US, we can leverage the same technology and connectivity that we established in Europe for US trades too. For banks, this reduces the need to build and run separate infrastructures for different markets.

York: Until a year ago, an individual direct connection to every issuer had to be built in each market to transfer lifecycle events into the systems automatically. Now, if an issuer already works with CONNEXOR, we can bring their lifecycle events into our tools through that same relationship, no matter where the issuer operates. We link up issuers where they are – with a direct API or a shared channel like CONNEXOR, depending on whichever works best. Either way, the outcome is the same: clean, standardised data, wherever our clients are.

Is CONNEXOR solving a problem that concerns the industry as a whole or is it only for the benefit of large issuers?

Marcon Fiastri: Larger issuers clearly have a greater incentive to use the CONNEXOR standard because they operate across different business areas, products and regions. If you issue only a few products per year, you can probably still handle much of the process manually – but if you manage tens or hundreds of thousands of instruments, you need a highly automated approach. And standardisation is not only a topic for issuers – it is just as important for distributors and other buy-side clients, who need to receive high-quality data quickly. That is why smaller issuers are also using the standard. In fact, distributors are increasingly asking all the issuers they work with to use the same format and that has helped drive adoption across the industry.

And from the point of view of the buy side: Does a tighter Luma-CONNEXOR pipeline widen the choice for advisers – or does it just remove friction without changing what advisers see on their screen?

York: I would look at these two things separately. Whether or not an issuer is added to the approved shelf of an adviser is a decision made by the asset manager – not by Luma. Once approval happens, what a tighter Luma-CONNEXOR pipeline changes is the cost and speed of onboarding. This is accelerated due to less manual data processing, cleaner lifecycle data and fewer errors. In the short term, the screen of an adviser might look the same, however, if operational cost and risk of adding an issuer is reduced, it can make that internal approval easier to justify. That is what actually widens the shelf over time.

Distributors say that in practice, CONNEXOR has the data but few institutions can actually read IBT (Internet Based Terms) natively; Luma has the platform but covers only a limited scope of issuers and services. Does this not mean a distributor wanting to find the best product for their client is still dependent on two or three systems – and faced with exactly the fragmentation problem you are trying to solve?

York: That is a fair description if we look at where the market used to be but it undersells the changes that happen once Luma and CONNEXOR are actually connected. The reason few institutions read IBT natively is exactly why we have established that integration: Luma reads and translates the data so the distributor does not need a separate system for this step. That removes one of the hurdles you are describing but not all of them. What remains is the question of whether a specific product is right for a specific client. That is a question of suitability and needs to be separated from the data layer. It is the bigger challenge. We are not pretending that it has already been solved just because the underlying data is cleaner.

What is the business case for a mid-sized bank or broker to use your offering – faster time to market, greater efficiency or some other benefit?

Marcon Fiastri: The business case clearly depends on whether the bank is an issuer or a distributor. On the issuer side, the main benefit is being able to use the same technology and infrastructure across different client segments, product types and platforms as that creates economies of scale, reduces costs and supports faster time to market. On the distributor side, the main benefit is receiving data from different issuers in the same automated way as that improves data quality, reduces operational effort and lowers risk.

York: I would point to something less obvious than time to market or risk – and that is consistency at scale. At a mid-sized bank or broker, a small team mapping the data of one issuer today will often have to handle the data of several more issuers within a year. It is not realistic to expect it to build the kind of dedicated, issuer-by-issuer expertise that a large global bank can offer simply because it has more resources. Shared infrastructure ensures that expertise is available within the system instead of asking a lean team to build up the infrastructure and expertise themselves. If a smaller firm has access to infrastructure that it could never justify building alone, this allows it to expand its offering and keep up with larger issuers

By now, CONNEXOR has expanded into Germany, Spain, Asia and the US. What did those markets have to give up to be connected?

Marcon Fiastri: Whenever a new standard is introduced, there is some initial scepticism among market participants due to the need to adapt existing systems and processes. However, in the meantime, trading has become much more automated and increasingly takes place through multi-issuer platforms – this means that the benefits of using the same infrastructure across different jurisdictions have become much clearer. Issuers can leverage the same technology in Europe, Asia and the US, while platforms can onboard issuers more easily and receive product and lifecycle data in the same way across markets.

Historically, Europe and the US have run on different conventions for Structured Product data. Is real convergence realistic or are we likely to see several standards that are compatible but not unified?

York: I consider full convergence neither realistic nor necessary. Europe and the US do not just use different disclosure formats; in some areas, they regulate at entirely different levels. What is more realistic is interoperability – meaning standards that can talk to each other without being identical. Looking ahead, I would expect the leading platforms to become compatible across regions, allowing high standards of data quality to be maintained without needing to have one underlying unified standard.

A Swiss-anchored infrastructure is gaining ground in the US market. Does origin matter to American issuers?

York: US issuers do not choose infrastructure by passport. They choose it because it is reliable, it integrates with the platforms they already use and it holds up operationally under volume.

UBS and other large Swiss issuers are increasingly carrying their model into global markets. An emerging industry standard or simply the result of a lack of alternatives?

Marcon Fiastri: Large Swiss banks have been key in promoting the CONNEXOR standard internationally because if you use the same middle- and back-office systems across regions, it clearly makes sense to apply the same data standard. Distributors have also played an important role: they want consistent data quality and timing across issuers and markets, and they encourage issuers to comply with the same standards. So, it is not simply a case of one issuer winning out – this trend reflects the benefits of standardisation.

Everyone is talking about machine-to-machine connectivity. How far do you expect it to advance over the next three years?

York: A lot of this is already happening on the data side. Lifecycle events increasingly flow from system to system without manual re-entry, at least on the largest platforms. Over the next three years, I would expect that to extend well beyond just the larger players. What I do not expect is fully autonomous execution and allocation with no human oversight at all – at least not in this market. That would be a massive step and we are not there yet.

Marcon Fiastri: I would say that with the majority of issuers we work with, more than 90% of payoffs are fully automated so machine-to-machine connectivity is already happening. Over the next three years, I would expect an even higher level of automation as clients demand speed and consistently high data quality.

How will AI change the way Structured Product data is used?

Marcon Fiastri: Across the industry, AI is already being used to create client documentation, parse documents and structure data to support decision-making. AI will certainly improve processes and data access and speed up decision-making but it will not replace the solid backbone of infrastructure that the market relies on.

York: I share that view: the real value of AI is only generated once that infrastructure backbone exists. Clean, structured data lets AI do more than automate documents. It can spot patterns across issuers and market conditions, catch anomalies early and compare benchmark performance, thus turning years of lifecycle data from a mere archive into a research tool. That capability can be available to any firm that is plugged into the same infrastructure, not just to those with big research teams. That is why I see AI as a reason to get infrastructure right first, and not seek a shortcut around it.

This issue looks at the possible impact of the US midterms on the markets. Why should an adviser in Zurich or Miami care about data infrastructure right now when making portfolio decisions?

Marcon Fiastri: Advisers can only make the right portfolio decisions if they instantly know what has changed in the portfolio of a client, such as a product being auto-called, and they are able to adapt the strategy and offer new products rapidly. That requires current, high-quality data supported by reliable infrastructure.

York: Good portfolio management is not about reacting to headlines – midterms included. It is about discipline – knowing exactly what you hold and what has changed in that portfolio the moment it changes. That kind of discipline does not happen by accident. It depends entirely on the infrastructure in the background – the data pipelines, the lifecycle tracking and the systems that catch a change before it becomes a surprise. That is true whether you are in Zurich or in Miami. A disciplined investment strategy is only as good as the infrastructure supporting it.

Thank you for the insightful conversation, Ms York and Mr Marcon Fiastri.  

__

Tara York, CFA
Managing Director, Head of EMEA, Luma Financial Technologies

Tara York is responsible for business development, growth and strategic partnerships across the entire EMEA region. From the EMEA headquarters in Zurich, she helps to expand the global footprint of Luma and its relationships with financial institutions, distributors and issuers. She previously held institutional asset management roles at asset managers, insurance companies, foundations and funds, spanning investment manager research, fund management and institutional advisery. She has been a CFA charterholder since 2018.

Francesco Marcon Fiastri
Head of CONNEXOR & Structured Products Sales, SIX Swiss Exchange

Francesco Marcon Fiastri has global responsibility for CONNEXOR, the infrastructure solution of SIX for issuance, reference data and the lifecycle management of Structured Products. He also leads the sales organisation for Structured Products listed on SIX Swiss Exchange and BME Exchange. He has driven the international expansion of CONNEXOR beyond Switzerland into Europe, Asia – particularly Hong Kong and Singapore – and the US, improving Structured Product workflows for both issuers and distributors. He has been a CAIA charterholder since 2021.