| Why Telekurs is opening in Dublin |
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| Brendan Murray talks to Beat Koch, CEO of Telekurs Financial, about the company’s move into the ‘exceptional’ Irish market and the future of the international financial services sector in Ireland. |
Telekurs Financial, the financial data vendor, officially opens its dedicated Irish operation in Dublin in May. The company, part of the Swiss-based Telekurs Group, is a specialist in the procurement, refinement and dissemination of international financial information for investment counselling, assets administration, financial analysis and securities administration.
Telekurs Financial employs a global network of local financial market specialists who acquire real-time stock market information directly at source from all major financial centres. The database maintained by the company and its 12 global branches has over 1.8 million financial instruments.
While other financial information providers, such as Reuters, have been feeling the pain of the global economic slowdown, Telekurs Financial has bucked the trend and is expanding into what it considers to be a market ripe for the picking.
‘The main reason why we decided to come to Dublin was primarily the market itself,’ explains Beat Koch. ‘The Irish market, especially the IFSC, has been growing so fast in the last 10-15 years. That created new opportunities, especially in the fund administration and custody business,’ he said.
‘In these days where we see a lot of problems in financial markets there are few markets which are really exceptional, but Ireland is one. We think here are a lot of areas where we can find customers and it is a place where we believe we can offer additional benefits to the financial markets,’ he observed.
The product
While Koch concedes that globally Telekurs are not a big player, he believes that in the current economic situation there a lot of advantages for smaller players who can be flexible if they can offer a tailor made solution. ‘On the one hand, whenever you have a recession you are better not to be one of the market leaders,’ he argued. ‘If you look at this difficult situation at the moment, our customers have reduced their headcount, they have to reduce costs, but on the other hand they want to stay in the business. Business for them still means, for example, securities processing, they have to offer all those activities and processes and if they have to do the same job with a reduced number of people they are more or less forced to start the automation project,’ he explained.
‘We see a benefit in the current economic situation for us because we have data, special corporate action pricing data, where we can support automated processes in back offices where we can support Straight Through Processing (STP),’ he said.
‘We can use the market data assets bases on a worldwide basis, similar to Reuters and Bloomberg, but because we don’t sell standard products we can then make tailor made solutions in the real-time architecture area for customers,’ he continued.
‘This is where are where we think that, while we don’t want to replace Reuters and Bloomberg in the dealing rooms, we definitely can offer a very competitive solution these days to customers who say ‘we don’t need Reuters and Bloomberg terminals in the middle office’ but in the back office we can offer, at least the same functionality and quality level, a cheaper option and this is a niche that we hope to expand in the future as well.’
‘Another niche we focussed on in Ireland in particular is our expertise in securities processing data.
We have corporate action we have, corporate action, we have pricing data. This is all coded and linked data so its not, like from other data vendors, you might have a corporate action offering and a pricing option from different sources,’ he added.
The future of Irish international financial services
Koch believes that going forward there will not be huge growth in financial services in Ireland. ‘There will be a lot of mergers in that area and there will be local centres worldwide that will become centres of expertise for a certain kind of financial offering,’ he predicted. ‘For me, Ireland is definitely one of the worldwide centres I see in the future for fund administration, even if globally the overall business will go down, Ireland will get more business,’ he suggested.
However, he is of the opinion that the tax advantages to be exploited by financial services companies locating in Ireland are no longer the primary motivation for such moves. ‘When we started to look at Dublin, with Telekurs UK, at the beginning everybody said ‘yeah, business goes to Ireland because of the tax advantages’. These days I believe that you will not win additional business here in Ireland solely because of tax advantages because in other centres they offer the tax advantages as well. What you have got in the last 10 years in Ireland is a lot of local knowledge, a lot of good skilled people, a lot of established organisations, leaders in, for example, fund administration - that’s the real strength these days.’
‘Also if you compare Luxembourg to Ireland the new business with derivatives and the most sophisticated funds, the administration tends to be based here in Ireland. You also have a very flexible regulatory environment and that helps to win such business,’ he enthused.
Koch noted that hedge funds were a particularly hot niche market for Ireland. ‘Ireland is, from an administration point of view, number one worldwide, well ahead of other established places such as Luxembourg,’ he pointed out. ‘There are lots of advantages that Ireland can offer - you are well positioned between the US and the rest of Europe, you’re part of the EU and have a very flexible regulatory environment. Dublin itself is also very solid political environment where you don’t expect major changes. These are probably the best ingredients you can ask for these days with a financial market. If that’s enough, nobody can tell because its dependent on the overall global economy but I think at the moment Ireland is very well positioned for the future,’ he said.
‘Our plan is not based on the fact that we will see the same growth in Ireland as we did in the last few years. There will be a shift in the future for financial institutions to focus on trying to grow themselves and try to secure the own business and financial institutions in the future, they really have to make sure they can offer the best possible service.
‘That’s the opportunity - there will be a shift from a lot of work which was done in the past manually will now be done in a more automated approach because you can’t find those people who are willing to do this repetitive tasks all the time and attain a certain quality level all the time,’ he added
Competition
‘Since we made the decision last year to go ahead with this project another vendor has already decided to do the same,’ said Koch. ‘To a certain degree this is already proof for us that we can’t be completely wrong. On the other hand, if we are right that will attract other vendors and I believe there is enough business in Ireland that a lot of data vendors can be happy,’ he added.
Comparing the Irish back office model to the Swiss model, Koch sees certain parallels between Ireland now and Switzerland in the early 1990s. ‘We had a lot of mergers in Switzerland and because of that there was pressure to automate all processes because we are a small country and can’t generate big business in order to service the mass market . Also, Switzerland is also one of the most expensive countries in the world so the labour costs were outrageous compared to other countries.’
‘If I just compare this with countries such as the UK and to a certain degree Ireland as well, another attraction for financial institutions when they came to Ireland low taxes and relatively low labour cost. Then a lot of work that was already automated in Switzerland was still made manually in those countries - that has changed now in Ireland as well because the labour costs went up.’
‘Because with the Basel II accord the banks are now under enormous pressure to reduce the operational risk and what we try to achieve on the one hand is to offer to reduce costs, to support the banks in these issues, but on the other hand also, with reduced costs, offer them a higher quality so that they can reduce the operational risk,’ Koch concluded. |
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| Article appeared in the April 2003 issue.
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