OTC Derivatives Self-Service

Most OTC derivatives applications used by financial institutions around the world share the same characteristics. Third party data collection, trade position calculation and audit trails are common features.

Yet, they lack transparency and real time information. Obtaining reports and data frequently require the participation of technologists, reducing efficiency and transparency, and increasing costs. While these systems are significant improvements over the old Excel spreadsheet days, they are insufficient for today’s marketplace.

Our client, a global custodial bank and financial institution, sought to improve their back office operations with improved software that met their business needs in an increasingly competitive business landscape.

Project Goals

The primary goal of this project was to develop self-service modules for employees in the following departments related to OTC derivatives trade: pricing, accounting, corporate action, trade directives and information delivery. Prior to the development of this self-service system, and as recently as 2 or 3 years ago, traders relied on developers to run reports related to trade position, as well as to fix trades that were either erroneously entered or that lacked requisite information due to lags in price feed transmission.

About The Technology – Pricing & Accounting

The OTC self-service system allows business end users to log into the accounting center and upload not only trade details, but their own prices for trades when 3rd party vendor valuations are either incorrect or delayed. Subsequent to trade entry, the pricing system automatically coordinates with the accounting function to ensure proper payment and collection data.

Moreover, authorized traders are also able to run position reports, not only at the trade level, but also at the lot and leg level. This capability provides granular data about who is trading specific securities, aggregated payor and payee data and fix and float information across the enterprise. The availability of enterprise-wide data protects the client against over-leverage scenarios.

By creating these trade related self service capabilities, end users gained increased independence to obtain the information when and how they needed it, while the client avoided repetitive development costs.

About The Technology – Information Delivery

After trade completion, the priority switched to trade directives, trade position, and risk analysis and management. To help facilitate improved transparency, SRI Infotech developed an all in one data sheet pertaining to trades, trade parties and ownership position.

Additionally, to improve information delivery to both internal and external stakeholders, SRI Infotech developed an additional self-service automated report delivery module. After a one time setup in which business end users define the client, the funds and other information, customized data is automatically delivered directly to internal and external stakeholders through a secure FTP protocol. As a result, authorized business users can customize data obtained from over 6,000 extracts to ensure that they receive only that information they need at the exact time they need it.

Permissions for different data streams are defined by senior management on a client by client basis to ensure adherence to conflict avoidance rules and regulations.

Conclusion

Through the use of automation and self-service applications, SRI Infotech assisted the client in empowering its traders to work more independently and efficiently, while simultaneously improving transparency and cutting development costs and institutional risk. In the highly competitive OTC derivatives market, this provided the client with a significant competitive advantage.

Let SRI Infotech help you maximize productivity on your trading floor. Contact us today and learn more.