The vendor will be accelerating its plan to be the source for benchmark industry-standard risk analytics.
A vendor offering open source risk analytics for derivatives, OpenGamma reports that it has raised $13.3 million in total from venture capital firm Accel, ICAP’s Euclid Opportunities investment arm, and Cristóbal Conde, the former president and CEO of SunGard, all in a bid to accelerate plans to become the maker of benchmark industry-standard risk analytics.
“By working with major global banks, derivatives exchanges and buy-side institutions, we’ve been uniquely positioned to efficiently build and release valuation models and risk analytics for OTC [over-the-counter] derivatives (such as interest rate swaps, x-ccy swaps, inflation swaps, swaptions),” says Peter Rippon, the recently appointed CEO of OpenGamma, in response to questions from FTF News.
OpenGamma releases these valuation models in an open source library.
The vendor offers a range of modular, software-as-a-service (SaaS)/cloud solutions that exploit an open source library of standardized derivatives pricing and risk models as an alternative to legacy, enterprise-wide platforms, officials say.
Rippon declines to name specific projects/products that will get some of the new funding. “There is a tremendous opportunity to help a broad range of financial institutions address the challenges presented by a growing set of global regulations,” he says. “This funding enables OpenGamma to accelerate implementation of its operating plan to become the industry standard for risk analytics, and helps these firms meet these challenges.”
In addition, the new investment will not be used to acquire other vendors.
“We’ve invested a lot of effort in building the foundations of a powerful analytics library,” Rippon tells FTF News. “The upfront work positions the firm ideally to capture the opportunity that exists to help firms address the capital and operational challenges they are facing today.”
Accel and ICAP have taken leading roles in the funding process.
Accel describes itself as an early and growth-stage venture capital firm that backs entrepreneurs that can build “world-class, category-defining” businesses. Over the years, Accel has supported Atlassian, BlaBlaCar, Dropbox, Etsy, Facebook, Flipkart, Fiverr, Funding Circle, Kayak, QlikTech, Simplivity, Slack, Spotify, Supercell and World Remit among others.
An interdealer broker that is also as provider of post-trade risk mitigation and market data solutions, ICAP through Euclid Opportunities invests in early-stage fintech investment businesses. Euclid Opportunities is part of the post-trade division of ICAP, which includes TriOptima, Traiana, RESET and ICAP Information Services. Some of the Euclid portfolio companies are Duco, AcadiaSoft, ENSO Financial Analytics, OpenGamma, Digital Asset Holdings and Abide Financial.
ICAP’s commitment to OpenGamma “aligns with our strategic focus on market structure that enables clients to optimize their regulatory and financial resources,” says Jenny Knott, CEO of ICAP’s post-trade risk and information division, in a statement.
The cash influx includes an investment from Conde, generally regarded as a financial technology pioneer. Conde joined OpenGamma board in 2014 as an independent non-executive director after his time at SunGard, which is now part of FIS Global.
“OpenGamma addresses the #1 issue faced by financial institutions active in the derivatives markets — which is that the amount of capital consumed by the business has exponentially outpaced the growth of the business,” Conde says in response to questions from FTF News. “This has happened because regulators, lawmakers, and the public have been crying out for transparency. OpenGamma’s commitment to Open Source, its cross-asset coverage, and its nimbleness (thanks to both its super-smart team and its cloud deployment strategy) delivers accuracy and transparency well beyond incumbent vendors and the great majority of in-house teams.”
In addition, industry-wide moves “toward cross-asset capital requirements, which would be lower, but their increased complexity create problems for buy-side institutions in terms of being able to prove out collateral calls, and also create governance headaches in terms of model control,” Conde says. “An open-source, cloud-based, super-geeky solution is clearly the solution. And OpenGamma is the only company whose DNA is wired that way. The industry needs OpenGamma to succeed because it’s the industry’s best shot at having a vendor that will help move the needle in terms of capital, and ROC [return on capital].”
Conde also likes OpenGamma’s ambitious operating plan. “It requires funding; it has received it from world-class investors because it is the only vendor that can help move the needle in terms of ROC,” he says. “I am honored to join such a group of investors. I urge those that share my views to collaborate with us either as clients, partners, or by joining the OpenGamma team.”
In addition to the news about the cash infusion, Rippon has become CEO after joining OpenGamma in 2014 as chief operating officer (COO), vendor officials confirm. Rippon spent two decades in financial software development management at investment banking giant Lehman Brothers, which famously fell during the Great Recession, and the former SunGard, officials say.
The now-former OpenGamma CEO Mas Nakachi will become vice chairman, and will focus on the company’s “global network of executive relationships and reinforcing its leadership in providing market structure solutions,” officials say.
OpenGamma also reports that founder and open source pioneer Kirk Wylie has recently left the company “to pursue other business interests.”
OpenGamma’s solutions target OTC or privately negotiated derivatives contracts, which the vendor says is a $493 trillion marketplace as of late 2015, according to the Bank for International Settlements (BIS).
The need for OpenGamma’s offerings stem from the requirement that the majority of these contracts must now be cleared with a central counterparty, vendor officials say. In fact, since September, U.S. regulators are requiring uncleared derivatives to be collateralized, increasing the complexity and cost of “accurately and efficiently allocating capital and resources across derivatives businesses,” according to OpenGamma.
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