Guillaume Chatain always had big ambitions. He also spent a good bit of time figuring out how to make rich people richer — in his words “understanding the needs and concerns.”
Then blockchain came along and he founded ResonanceX to make structured products, long reserved for hedge funds and ultra-high-net-worth people, and ready them for investment from the masses. Not quite Robin Hood — but close — though there’s no theft involved.
BlockTelegraph caught up with the ResonanceX team, led by Chatain, to find out when and how we’ll all be able to get in on the action.
- Your team has its own wild background. Share that.
Our team is deeply rooted in capital markets, and we are both engineers by training… myself as a rocket scientist who then completed an MBA at Columbia Business School, and my co-founder Hariton Korizis who obtained his PhD in Electrical Engineering from Imperial College.
This is where the similarities end, as we each started building a complimentary set of skills: Hariton then spent 10 years leading investment solutions at major investment banks such as Barclays and HSBC, while I was at the same time serving client facing roles as head of equities for J.P.Morgan Private Bank in Europe and Asia, understanding first-hand the needs and concerns of rich individuals.
- For the uninitiated, what are structured investments?
Structured investments are fixed-term solutions that are particularly suited for goals-based investing. They consist of a combination of zero-coupon bonds and a strip of derivative instruments enabling to customize risk/return exposures in accordance with the end client’s market views. Such solutions trade as securities and enable investors to access a wide range of reference assets for diversification or risk management. Despite their benefits, they have long been reserved for hedge funds and ultra high net worth individuals, because of their high costs of creation, intermediation and distribution. The ResonanceX vision is to broaden access to such solutions, that should be included in every efficient portfolio.
- Your tech appears to have deployed. Share on that news.
As part of the FCA regulatory sandbox at the beginning of 2018, ResonanceX facilitated the creation, distribution and execution of our first two 100% principal protected notes with £90k notional. We not only proved that our automated platform integrates with the existing systems governing capital markets, but also that emerging technologies such as blockchain can massively reduce frictions in full compliance with legal and regulatory requirements for the safekeeping of client money & assets in the U.K. We can trade through the existing centralised system, but also offer a migration path to utilise blockchain when it reached adoption.
- Why is blockchain the best solution for structured investment “democracy”?
This emerging technology is only one of the building blocks for “democratization” – with blockchain we can streamline the processes to exchange values while removing expensive intermediaries. To this end, the ResonanceX platform was instrumental for the first structured product to ever use blockchain custody in a regulated environment, and we demonstrated greater than 90% cost reduction for clearing, settlement and custody of assets in the process.
This was the first step to use blockchain to reduce costs to produce a structured investment, and the next use case will involve smart contracts to govern the lifecycle of each product and almost eliminate corresponding middle-office overheads.
However, I’d like to insist on the fact this is only solving for one small part of the democratization process… cheaper products and disintermediation are a condition to this process but I can’t stress enough the requirement for a first-class education on markets and derivatives together with very intuitive risk management tools and clean displays of performance analytics.
- Isn’t democracy bad, in some cases?
This topic could be discussed for hours. However, I agree that democratizing access to capital markets can be detrimental at times. As an example, should more people trade stocks from their phones just because it’s apparently “free” to do so?
At ResonanceX, we help financial advisors to control the downside risk of investing in the markets by using bespoke solutions until now reserved to Wall Street elites. And as an entity currently regulated by the Financial Conduct Authority in the UK we have a disciplined approach to client onboarding, including the use of a proprietary appropriateness test that is complemented with unbiased education modules. As a result ResonanceX provides financial advisors with safe and smart access to the protection and downside buffers usually embedded in structured investments.
- Blockchain seems to solve a lot of things. Can it solve Brexit?
There are a lot of positive impacts of this technology, with probably the more immediate being the potential operational efficiencies, and the broader and direct access to investments (disintermediation). A blockchain helping with frictionless trade across the Irish – UK borders after Brexit was suggested by UK’s Finance minister in October, as a solution to a hotly debated issue around customs controls that could delay the Brexit talks. However, given the technical and political complexity of such a topic, it is really hard to speculate on its potential success or failure.