Centralized Platform for Trading Over-the-Counter Securities
A centralized platform for trading over-the-counter securities that brings holders and investors together, allowing them to bypass intermediaries and trade assets - quickly and easily.
About the client
The client is an investment company specializing in the over-the-counter (OTC) market and off-exchange trading.
Engagement model
Time & Materials
Solution
Web app for trading over-the-counter securities
Project Team
1 PM, 1 BA, 2 Frontend Developers, 3 Backend Developers, 1 Software Architect, 2 QA engineers
Effort and Duration
18 months
Project background
When it comes to the over-the-counter market, searching for information and concluding deals requires a significant investment of time. It is difficult for an investor to know that OTC securities are available for order because the information is usually only accessible on the website of the depository where they are stored. Investing in OTC securities is further complicated by the presence of multiple intermediaries between the investor and the issuer, and by the fact that the investor’s personal presence is often required to close the deal. At the same time, the OTC market often offers investment opportunities that aren’t available in the highly competitive market of publicly listed companies.
Our client wanted to automate the process of OTC securities trading. He approached us with the idea of building a centralized platform that would connect the security issuer or holder with the investor, and automate the buying and selling of OTC securities as well as the search and exchange of information. The client chose Itexus because of our extensive experience in developing complex fintech systems, and for our ability to speak the language of experienced financiers.
Tech stack / Platforms
Target audience
The solution is targeted at two main segments – issuing companies looking to raise additional capital for business development, and security holders looking to sell their assets. It is also expected to attract inexperienced investors, who will appreciate both the transparency and the intuitive and simple navigation throughout the whole OTC trading journey, from registration to money withdrawal.
Solution overview
The primary purpose of the solution is to simplify and automate the process of buying and selling over-the-counter securities. The product is a web application designed to perform two primary functions:
- Trading OTC securities
- Collecting and disclosing reliable information about the security issuers
The platform mimics the functionality of exchanges and brokers for over-the-counter securities. It allows issuers and holders to include information about securities available for purchase and lets investors view information, communicate with each other and with sellers, make trades, top up their accounts, and withdraw funds.
Holders transfer their securities to the platform’s depositary account, after which the securities are made available for trading through investors’ virtual accounts. All transactions are processed through the platform’s bank and depositary accounts. Both individuals and legal entities can use the platform.
How it works:
- The issuer or holder declares that they want to sell their securities and adds them to the platform. Securities issuers can reduce the commissions charged for trades by providing information about the company.
- Investors review the offers of holders and issuers, and can then make a purchase decision.
- Investors buy securities and manage their portfolios. Investors can also indirectly influence the demand for the securities of specific issuers by leaving reviews.
- Money and securities are accumulated on the platform’s bank and depository accounts.
- The internal billing system distributes funds to users’ accounts according to their shares.
Functional modules and solution main features
The platform consists of client and admin modules. Admins can moderate users, issuers, and assets information, manage content, and analyze business performance.
As for the client module, different options are available. Depending on the user’s goals, they can buy or offer securities.
Investor role functionality:
- View offers from securities holders
- Filter securities by industry, revenue, profitability, and other criteria
- Pass KYC procedure to access trading
- Add more money to their account
- See the purchased securities in the personal account
- Leave reviews on different issuers
- Monitor portfolio performance
- Withdraw securities/money from the platform
For the client, it was important that we not only created a solution for trading OTC securities, but also one that encouraged communication within the investment community. Through the platform, investors can get acquainted and follow each other’s public actions. Similar social networks for investors have already been implemented by major banks.
Security Holder role functionality:
- Place securities on the platform
- Set prices on securities and put them out for sale
- See the money received on the internal account
- Monitor portfolio performance
- Remove securities from circulation
- Withdraw securities/money from the platform
If the security holder is also the issuer, they can attach supporting documents that disclose information about the issuing company, or provide details about the company that may be of interest to potential investors.
Third-party integrations
Project approach
We started with a discovery phase and came up with the solution architecture, crafted a software requirements specification document, prioritized features, and made a product roadmap and a risk mitigation plan. Then we moved on to the development process, which was organized according to the Agile model. Taking into account the prioritized features, we divided the building process into several iterations. Each iteration was followed by the demonstration of the developed features to the client and a feedback collection session.
Technical solution highlights
Matching engine
To match buy and sell orders for OTC securities within the platform, we have integrated it with the Exberry Engine. This is a customizable securities supply and demand matching tool that determines the best buy order with the highest price, and matches it with the best sell order with the lowest price.
We chose the Exberry engine because it is built on a set of high-quality software components, such as order and quote management, transaction cost analysis, latency infrastructure, trade allocation algorithms, RESTful and WebSocket APIs, etc. All of these components are designed to work together to provide a fast and robust yet flexible tool for the financial markets, and allow users to take control of their trading.
On-premise servers
Our client did not want to rely on external factors such as internet connection to access the servers, preferring to control all changes, configurations, and upgrades themselves. It was also crucial to eliminate any risk of data vulnerability and completely restrict access to data to authorized personnel only. As a result, we chose to opt for on-premise servers instead of the cloud, to give our client complete control over the platform and the data stored within it.
Results & future plans
The first version of the system was completed and launched in beta testing mode within 18 months. The Itexus team developed the trading platform in full compliance with the client’s expectations, delivered a robust and intelligent solution that connects investors and securities holders, and facilitates OTC trading by enabling the bypassing of intermediaries.
Currently, we are preparing to launch the platform in our client’s local market. As we collect data on consumer responses, we will introduce enhancements and focus on exploring new markets.
Interested in crafting a similar solution? Just need some expert advice on the topic? We’re happy to assist you in any way we can! Contact us today.
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