SIX Financial Information, a subsidiary of SIX Group, is a global financial data company that provides mission-critical data to financial institutions, asset managers, insurers and other corporations in over 20 countries around the world. That reach extends to the US, which has become an increasingly large market for the Zurich-based company. That’s because regulatory and compliance demands have grown in scope and complexity in the wake of the financial crisis. And with several new EU regulations coming into effect over the next few years, US-based entities that do business in Europe will need to up their game. Given the rise of blockchain, regtech and AI-related financial applications in recent years, SIX Financial is also a name to know for fintech start-ups seeking to develop their solutions on the back of reliable reference and corporate actions data. The company’s CEO, Robert Jeanbart, was recently in New York, where he and The FR’s Gregg Schoenberg sat down to discuss his company’s positioning in the US marketplace and his take on the current global financial regulatory climate.
Note: SIX Information is an ongoing events client of Financial Revolutionist Holdings.
The Financial Revolutionist: Robert, thank you for making time during your New York swing to sit down.
Robert Jeanbart: It’s my pleasure, Gregg. So I understand that you want to discuss pasta with me. Is that really what you want to talk about? Spaghetti?
FR: Yes, because SIX Financial Information likes to talk about spaghetti regulations that wind their way through financial institutions.
RJ: Actually, we invented the reverse pasta machine. We take all the pasta and turn it into dough so that clients can have full control over all of the regulations they have to confront.
FR: Ah, I see now. Can you describe how compliance offerings became such a big part of your business globally?
RJ: When I joined this company, we were a good athlete, a company that could execute ten disciplines pretty well. But then we asked ourselves what the core assets of our company were. We concluded that compliance and corporate actions solutions were where we were truly best in class. And thanks to regulations that started to pop up everywhere, we believed that our reference and corporate actions data could be transformed into a good value proposition we could offer to our clients.
FR: What was your first big stake in the ground with this new strategy?
RJ: The first attention grabber came with the PRIIP investor protection rules.
FR: And the need for KIDs (Key Information Documents) that required easy-to-understand documents for investors?
RJ: Yes, the KIDs… bravo for mentioning them.
FR: So fast forward to today. Your company is widely known to be a large provider of reference data, which is a key building blog for any financial institution. Is that right?
RJ: Absolutely. Without reference data, you just cannot make it. Look at the KID, which is a full product description. Lying underneath the whole thing is reference data. The same is true for the sanctions business that we have. All of it starts with reference data, and in recent years, the take-up on it has been huge.
FR: Here in the US?
RJt: Yes, both here and in Europe. Or to put it the other way around: two-thirds of the demand for our new compliance and regulatory products come from outside Switzerland. So while we were originally collecting data to serve our Swiss client base, the take-up outside our home market has been great.
FR: Why do you think that’s been the case, given the formidable competitors you have in the US?
RJ: Two things: first, I’m proud to say that we're the only global, non-North American player in our areas of focus. We don't offer trading data, we don't do chats, we don't do big pricing business. We just focus on collecting, aggregating, managing, cleansing, normalizing and further redistributing reference and corporate actions data. So for the customer base we target, many of them think SIX when it comes to our areas of expertise.
FR: And the second?
RJ: The collection, aggregation and management of corporate action and reference data is a very meticulous and very detailed type of data business. It’s very–
RJ: Exactly. Very Swiss, and it goes with our Swissness. That's a huge advantage for us as compared to our bigger competitors. Our meticulousness.
FR: Have you found in the last few months, or maybe even longer, a change in perspective or in understanding that EU-based regulations matter to US institutions who trade with Europe?
I keep on saying it to people in the US. They think these European rules don’t affect them. But I’ll tell you, those regulations may be EU triggered, but they apply in multiple dimensions.
RJ: I keep on saying it to people in the US. They think these European rules don’t affect them. But I’ll tell you, those regulations may be EU triggered, but they apply in multiple dimensions. If the instrument is traded in the EU, if the customer is EU-domiciled, or if the institution has an EU-based operation, an institution here is affected. It's just like our sanctions business. It doesn't matter if the sanctioned entity or individual is a direct owner or the beneficial owner.
FR: Do you hear much talk about institutions moving towards a global standard as it relates to MIFID2 and other regulations?
RJ: What we've seen here is that there are US project teams and there are European project teams. Those two teams aren’t as joined up as you would think they would be for the same organization, and that's the impression we're getting from people on both sides of the Atlantic.
FR: You’ve obviously seen the efforts by the Trump administration to roll back financial regulations in the US market. That doesn't impact your product offerings, does it?
I don't think people understand the degree to which sanctions-oriented regulations are an enormous challenge for banks and asset managers. Those regulations aren’t going away.
RJ: Not really. Look at our sanctions data, for example, which is useful for an American audience to hear about. I don't think people understand the degree to which sanctions-oriented regulations are an enormous challenge for banks and asset managers. Those regulations aren’t going away.
FR: It strikes me that SIX Financial was deeply involved in the regtech space before that became a thing. It’s also based in a nation that is knee-deep in blockchain experimentation. But I took a note of a report written by SIX Securities Services last year that indicated that significant blockchain adoption was six years away. Are we five years away today?
RJ: Well, the development is progressing rapidly now, and I can tell you what we’re doing with blockchain today.
RJ: As you may know, SIX manages and co-owns an incubator and accelerator named F10. Together, we have been working on a blockchain solution that addresses one of the most difficult pain points within the financial services industry.
FR: What’s the problem, and is the “we” at the F10 level or the SIX level?
RJ: It’s a coordinated effort towards creating an MVP for a product called xChain, which is used to validate corporate actions on the blockchain.
FR: Why did this become a core initiative?
RJ: Today, within every single bank or broker, there are people whose main job it is to validate corporate actions. The search for the single correct version of the truth is not easy. What is the dividend? How much? How will it get paid? What are the conditions? Today, these people have two or three sources. They call around, contact custodians, go here and there. It goes on and on.
FR: That sounds time-consuming and painful.
RJ: Yes, but in the future. any team within SIX will be able to bid for the product we’re creating, take it and productize it. We’re excited about it because when this works, ideally the 1,600 sources we use for corporate actions will be piped in through xChain. Doing so should take an enormous workload off of our customers.
FR: How far away do you think xChain is from becoming a reality?
RJ: We are probably a few months away from an MVP and maybe two years away from a real product.
FR: That’s way earlier than five years. Do you have any partners on this MVP?
RJ: Yes. SIX Security Services.
FR: I believe you have a partnership with IBM, but not for this, right?
RJ: Our partnership with IBM is a cybersecurity story.
FR: I see. So do you have any other notable regtech projects in the works?
RJ: Yes. We are also a lead sponsor on another project we internally call Tax Cube.
FR: Which is for individual investors, right?
RJ: Yes. With all of these tax-driven regulations, we believe that the investment paradigm in the minds of private investors will evolve. Today, most investors look for absolute returns or for a benchmark return: “I want a product that is better than an index or better than X percent.”
FR: Outperformance on a return basis.
We believe that an advisor should be in position to offer a client portfolio varieties that are not only return-optimized, but optimized for return after tax.
RJ: Yes, but now, with the automatic exchange of information, investments become pretty dented by various country and local taxes. We believe that an advisor should be in position to offer a client portfolio varieties that are not only return-optimized, but optimized for return after tax. That is Tax Cube’s purpose.
FR: So an automated tax optimizer.
RJ: Exactly. We will provide our data and mix it in with the tax information from each country to make tax suitable recommendations.
FR: Why is this the right time for such an offering?
RJ: Well, as you know and as we’ve seen, investors go to safe havens. They take their returns there and they don’t pay taxes. This is over.
RJ: Yes. On January 1st, it's over. That's it. Wherever you live, your tax authorities will get the reports.
FR: Well, thank you for not mincing words, Robert. And thank you also for taking time away from your schedule while in the States.
RJ: Thank you, Gregg. It’s good to talk to you.
This Interview has been edited for content, length and clarity.