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Devising a Smarter Approach to Client On-boarding and Certification

Newer tools that automate much of the on-boarding process can help companies get clients up and running much faster.

Candyce Edelen, CEO, PropelGrowth
Candyce Edelen, CEO, PropelGrowth

The timeless challenge for new trading venues is to attract clients to connect before they have substantial liquidity. IEX Trading was confronted with this issue as it launched its new trading platform in October 2013.

IEX's business model is unique. A market designed to provide investors with a higher quality trading experience, IEX is a registered alternative trading system (ATS) funded entirely by a consortium of buy-side organizations including mutual funds, hedge funds, family offices and individuals. Brokers can subscribe to the platform on behalf of their clients, but IEX has no broker owners. According to IEX, this model creates a truly broker-neutral marketplace. The firm is focusing its efforts on attracting order flow from natural investors and educating broker clients how to optimize their algorithmic strategies to generate higher quality results on its ATS.

With support from the buy side, IEX sought to find innovative ways to lower barriers for sell side participation. As part of this goal, the firm wanted to design a seamless user experience that makes it easy for customers to connect and use the venue. But a major hurdle to achieving this goal is that the traditional method used for client on-boarding and certification testing is manual, and therefore highly tedious and time-consuming for both exchanges and their clients.

Creating a Seamless Customer Experience
While IEX's primary goal was to create a frictionless customer environment, they also needed to ensure that their internal processes remained as efficient and cost-effective as possible. Management recognized that automating the client on-boarding and certification process could help with both of these initiatives. Introducing automation can help exchanges get clients on-boarded and certified faster, ultimately improving their user experience and speeding up the firm's time to revenue.

"We wanted to dramatically simplify the processes of developing interfaces and certifying new market participants," said Billy Zhao, Market Access, IEX Group, Inc. "By simplifying, we could overcome objections to connecting and make it easier for sell-sides to try out our new platform."

"Our technology team is very process-oriented. We look for ways to handle things deterministically," explained Zhao. IEX looked at several vendors to find a platform to support this objective. Following a thorough evaluation, they selected Lasalletech's FIX Conductor to help automate client on-boarding and certification.

Speeding Up the Client's Development Cycle
Providing an automated QA interface helps simplify the work IEX customers need to do in developing their interface to the trading platform. According to Zhao, "Using FIX Conductor, we can give clients access to our QA system immediately after we provide the FIX specifications. This allows them to immediately assign development resources and start coding and testing. The QA system runs the same exact tests as our certification system. This way, our clients can develop their interface and test as needed against our system, sending in orders and getting instant feedback. This dramatically speeds up the client's process of developing and testing the interface."

But clients aren't left alone to handle the testing process. Zhao pointed out, "It's self-service, so they don't have to work around our schedules. If they run into issues, they can still pick up the phone and talk to us. We can look into the order book and tell them what's wrong."

This process is particularly helpful for off-shore development resources. According to Zhao, "Some of our counterparties have QA and development resources in India. This has been a great help, because rather than having to wait to schedule a time to work with us, they have 24 x 7 access to the IEX trading environment."

The system allows counterparties to identify problems and solve them at the client's convenience. "When you test is when you surface the problem," said Zhao. Clients can surface and resolve problems, and once they pass all the tests during their QA, they're ready to certify. "We rarely surface issues during certification. There are minor exceptions, but on the whole, almost all our certifications are getting done in less than two hours. It's not shorter because we're skipping steps. It's shorter because all the steps that need human intervention are moved to the end."

Dispelling the Myths
So with all the positive benefits attached to automating certification, why aren't more firms electing to adopt this approach? It may in part be due to a general apprehension that automation would make for an impersonal client experience—much like the frustrating automated systems many of us encounter every time we call our banks about issues related to our personal finances.

But Jacob Northey, Managing Partner at Lasalletech, disagrees. "There is a general misconception in the industry that in the transition from manual to automated on-boarding, firms will lose the personal connection they have with clients," said Northey. "However, this couldn't be further from the truth. Instead, it merely speeds the process along, automating the simpler and repetitive activities, while still allowing clients that one-on-one interaction for more complex issues. Clients are able to test and interact with the system at their convenience. They get immediate feedback on any issues, instead of having to wait for the IEX staff to search through extensive FIX logs in order to communicate errors. Human support is available anytime clients need it."

According to IEX, FIX Conductor gives their staff visibility into the exact screens clients are seeing, helping them offer improved technical support.

"Typically, in certification testing, a client and exchange's FIX logs are not identical. We don't see them in the same format, and this can create confusion about what's truly going on," said Zhao. "One of the key reasons why we selected the Lasalletech product is because it allows our certification professionals the ability to view screens in the exact same way clients view them." Candyce Edelen is CEO of PropelGrowth, an agency helping financial technology companies develop and implement go-to-market strategies. Prior to PropelGrowth, she co-founded two financial technology companies including Selero, a company that provided order routing gateways, ... View Full Bio

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