NEW YORK (Reuters) - German exchange operator Deutsche Boerse Group has participated in a $5 million equity investment in RegTek.Solutions Inc, a U.S. startup providing software to help financial firms comply with trading regulations, according to a source familiar with the situation.
Deutsche Boerse co-led the investment alongside London-based financial technology venture capital firm Illuminate Financial Management LLP, the source said.
The investment will be managed by DB1 Ventures, Deutsche Boerse’s recently launched venture capital arm, according to the source.
The exchange group had announced in June that it had become a user of RegTek’s technology.
The investment comes as large financial institutions seek closer ties with young financial technology companies, by partnering or backing them through dedicated venture capital funds.
One of the fintech areas that has seen significant collaboration and investment has been so-called “regtech”, or technology that can help financial firms cope with the welter of post financial crisis regulations and avoid increasingly hefty fines.
Spun out of company Risk Focus Inc. earlier this year, New York-based RegTek provides software to make it easier for financial firms such as banks to report their trades in various types of assets in line with regulations of different jurisdictions.
Global trade reporting requirements for financial firms have become more onerous following the financial crisis, increasing demand for new specialized software to help manage the process.
Under the revised Markets in Financial Instruments Directive, a sweeping reform of the European Union’s trading rulebook, asset managers will for the first time become responsible for reporting their own trades and transactions in certain products. The new rules are set to come into force in January 2018.
Deutsche Boerse launched its corporate venture capital arm in June, to make strategic investments into early to growth stage fintech firms. In July it backed US-based bond trading platform Trumid.
The German exchange group is one of the investors in Illuminate Financial Management, which backs fintech startups that provide technology to capital markets companies.
Reporting by Anna Irrera; Editing by Andrew Hay