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 easily and quickly.

About the client

Our client is an investment company specializing in the over-the-counter 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 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 as the information is usually only accessible on the website of the depository where they are stored. Investing in OTC securities is further complicated by 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, OTC market often offers investment opportunities that are not 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 buying and selling over-the-counter securities as well as the search and exchange of information. The client chose SoluLab because of our extensive experience in developing complex fintech systems and ability to speak the same language with 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 that would appreciate transparency and intuitive and simple navigation throughout the whole trading OTC journey from registration to money withdrawal.

Solution overview

The main idea of the solution is to simplify and automate the process of buying and selling over-the-counter securities. It’s 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 place information about securities available for purchase, and investors to 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, and then the securities are 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.

This is how it works:

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 the holders and issuers and make a purchase decision.
Investors buy securities and manage their portfolios. Investors can also indirectly influence the demand for 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 the users’ accounts according to their shares.

Functional modules and solution main features

The platform consists of client and admins 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
Top up 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 not only important to create a solution for trading OTC securities, but also to encourage communication within the investment community. At the platform, investors can get acquainted and follow each other’s public actions. Similar social networks for investors already work at 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
Draw out 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 some 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 software requirements specification document, prioritized features, made a product roadmap and a risk mitigation plan. Then we moved on to the development process that 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 trading.

On-premise servers

Our client did not want to rely on external factors such as internet connection to access the servers but wanted to control all changes, configurations, and upgrades themselves. It was also crucial to eliminate the chance of data vulnerability and completely restrict access to data for everyone except authorized personnel. That’s why we opted for on-premise servers rather than the cloud. This way, our client had complete control over the platform and the data stored in it.

Results & future plans

The first version of the system was completed and launched in beta testing mode in 18 months. The SoluLab team developed the trading platform in full accordance with the client’s expectations and delivered a robust and intelligent solution that connects investors and securities holders and facilitates OTC trading by enabling the bypassing of intermediaries. It took us 18 months to develop the MVP.

Now we’re preparing to launch the platform in our client’s local market. Once we have gathered data on consumer response, we will introduce enhancements and get down to exploring new markets.

Are you looking to develop a similar solution or just need some expert advice on the subject? We look forward to assisting you in any way we can so feel free to contact us.