To paraphrase a former president, there are “a thousand points of light” when it comes to activity on the over-the-counter (OTC) derivatives execution, clearing and valuation fronts. Variety abounds as State Street touts a platform that will compete against sell-side offerings and major sell-side players such as BNP Paribas gear up to ready offerings for the buy side.
In a Financial Times story last month, State Street officials detailed an “end-to-end” OTC derivatives platform that will offer a swaps execution facility (SEF) and swaps clearing along with its incumbent services for analytics, OTC valuation, risk management and custody, accounting and collateral management support. State Street foresees a first-mover advantage via OTC reform. Banking Business Review reports that investment manager BlackRock has hired Morgan Stanley to be one of its primary clearing brokers for OTC derivatives. Also last month, BNP Paribas announced that it is working with Calypso Technology for its OTC valuation services, a sure sign that other big banks are pursuing similar strategies.
On the vendor front, OTC derivatives software provider Fincad has just launched F3, version 2.2, with new features for counterparty credit risk valuation. In addition, Aberdeen Asset Management officials acknowledged that they have implemented F3 to support its more than $270 billion of assets under management.
Another vendor Paladyne Systems also recently released the latest update of the Paladyne Portfolio Master with enhancements for OTC modeling and valuation that include additional model libraries, more sensitivity analysis, and more real-time access to market data, encompassing curves, volatilities and spreads.
Given the backdrop of these and more developments to come, I will ask your indulgence as I do a little shameless self-promotion.
A while back as the particulars of OTC reform were obviously unclear, I urged the events group at FTF to put together a free webinar to provide some clarity. They graciously accepted my ideas and have run with them. The webinar, “The New Matrix for Derivatives Pricing and Valuation,” will happen on Wednesday, March 14, at 11AM EST. The event will feature hosts Sean Owens, a top industry analyst from Woodbine Associates, and Chad Wekelo, founder and principal with Actualize Consulting.
The webinar will dive into the latest moves by industry regulators and others charged with overhauling the OTC derivatives and centralizing clearing requirements. We will solicit input from buy- and sell-side firms on the impact of regulatory changes on their pricing and valuation systems. We will also have a discussion of the potential pitfalls inherent in establishing independent pricing and valuation practices.
The webinar is intended to help firms start to sort out the vagaries of OTC reform as it appears many of you will be spending more for middle and back office systems in 2012 and beyond. Market research firm Celent is predicting that spending in this realm will grow at a 6.2% CAGR, rising to $383 million by 2014.
So please check out the webinar and let us know how useful it was for you.
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