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Interview: Transcend’s Bimal Kadikar on Global Traction and the Citi Investment

Bimal Kadikar, founder and CEO of Transcend recently spoke with Anna Reitman of Finadium regarding Citi’s investment in Transcend and how it will support future expansion of the firm.

Citi’s venture arm recently made an investment in a roll out of Transcend’s collateral management technology globally. We speak with CEO Bimal Kadikar about how that investment will support the players, places and products that are part of expansion plans in 2024 and why the economic and regulatory backdrops fit in with the timing.

Kadikar noted that the investment positions Transcend towards “solidifying our strategy” and boosting liquidity to “execute on the direction that we have set out.” Citi is the third bank to invest in Transcend, with the other two being undisclosed.

Citi also has “ambitious plans” to expand Transcend’s technology internally, aiming to harmonize and integrate activity across businesses to make collateral allocation decisions. According to the statement, “a long-term business agreement will enable Citi as a client to significantly enhance the efficiency of how it deploys cash and collateral across its global network.”

The investment is earmarked for expansion across client, product and geographical lines as collateral optimization for liquidity funding gains traction across numerous industry players, in part due to market expectations of a “higher-for-longer” interest rate environment.

In the backdrop is a regulatory environment in which authorities are “tightening the screws” on firms, with mandates on around integrity, analytics, with a keen eye on intraday liquidity. US regional banks, for example, are under increasing pressure to improve liquidity positioning. And as the “dust settles” on Basel III Endgames, collateral market participants are expecting significant implications for capital requirements.

Those drivers are translating past the traditional sell-side space – banks and broker-dealers – to asset managers and insurance firms, as well as regional banks, explained Kadikar.

“The solutions that we have developed for sell-side are very similar to the solutions that insurance companies as well as the asset managers are looking for, with some tweaks and some adjustments clearly, but we will be working through that and that is a big focus area for us in the quarters (and) years to come,” he said.

One of the ways the opportunities are measured is in terms of cost savings, which Kadikar reckons can be tens and even hundreds of millions of dollars if firms get optimization right. The priority for clients, he added, is to boost optimization capabilities because what is currently in place is not enough for too many firms.

“Being able to have very robust optimization capability that cuts across business areas for them, to save on their liquidity funding and collateral costs — that’s a huge priority for almost all front lines,” Kadikar explained. “Most firms have been working at it, but they are working in silos and there (are) some capabilities here, and some capabilities there, but almost all of them have realized that they have a lot more to do, and a lot more to gain.”

Products and Places

In terms of new geographies, expansion plans include focusing on Europe, Middle East and South Africa, and the team is in early days of Asia expansion with Transcend’s India presence expected to serve as an anchor.

A major initiative that has been a couple of years in the making is establishing a network of connectivity across the complex industry ecosystem of triparty agents, CCPs, depositories and nostro accounts. Transcend is currently connected to all the major triparty agents and 20 CCPs globally, with 20 more coming online in the next 12 to 18 months.

“We have a very ambitious plan to create network connectivity across all the major players that affect collateral, funding or liquidity in these businesses,” he said. Those businesses can be across the range of the collateral market landscape, and includes equities, repos, prime, cleared and uncleared derivatives margin as well as treasury and operations functions.

“This space is generally underserved, not because of the intent but because of the complexity,” Kadikar said. “We have been chipping at it over the years and now we have the sufficient technology and sufficient integration to provide that level of capability that the industry is looking for.”

It’s not any one technology that is coming to the forefront, but rather a collection that is increasingly being orchestrated and adopted. Machine learning trained on historical data is proving to be particularly well suited for the information complexity that needs to get synthesized, and early days development is moving forward in Transcend’s lab, he noted.

“We are very excited about the potential of this because we are now collecting so much information for our clients from such diverse industry sources that new technologies can help us synthesize in helping (clients) make better decisions,” he said.

This article originally appeared on February 14, 2024, used with permission.