Risk Technology rankings 2010

RISK MANAGEMENT l DERIVATIVES l REGULATION

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Risk Technology rankings 2010The age of change

www.murex.comDECEMBER 2010

1 Reprinted from Risk December 2010

The world of risk management and derivatives trading technology has experienced something of a

transformation over the past couple of years. Before the financial crisis, specialist trading and risk management systems vendors, including some small niche suppliers, tended to focus on one or just a few asset classes or risk factors. Now, the focus is on integration, consolidation and cross-asset support, as well as risk aggregation and real-time analysis.

Meanwhile, new regulation has put a greater focus on liquidity risk, counterparty risk management, capital management and clearing. Some of the larger banks have opted to develop their own solutions, investing huge amounts in high-performance risk management systems and front- to back-office trading platforms, designed to link to multiple central counterparties. Others have seen their technology budgets squeezed – or more carefully managed.

Against this backdrop, Risk asked thousands of banks, asset managers, pension funds and hedge funds to vote for their favourite technology vendors – and the results are in stark contrast to the huge changes taking place in the markets they serve, with the top three vendors unchanged from last year while the rest of the leader board saw more of a shake-up (see table of results).

A number of vendors agree having a one-stop offering is increasingly important as banks look to combine existing multiple front-office systems. The aim is to consolidate as much activity as possible.

As well as consolidation and cross-asset capability, scalability is increasingly important. A focus on flow by some participants and the continued growth of high-frequency trading firms has put enormous pressure on bank systems – forcing vendors to ensure their products can cope. Murex, for example, has increased the throughput and scalability of its cross-asset MX.3 platform over the past year, says Maroun Edde, chief executive of the company. It has also extended its support for high-per-formance parallel processing of analytics through use of computer grids and clouds, and is now porting its analytics on to graphic processing units – a move that will give orders of magnitude increases in processing speed, claims Edde.

Meanwhile, customers are requesting considerably higher levels of flexibility from their systems without compromises in any of their characteristics – and they want this at a lower cost and reduced risk when implementing systems. Today, the budget for large systems implementation projects is typically half what it was in 2007, says Edde.

One of the primary concerns among banks, however, is meeting new regulations. The Basel Committee on Banking Supervision is scheduled to finalise its Basel III package of measures this month, which will introduce rules on liquidity,

leverage, capital and credit value adjustment (CVA). New capital rules will also be introduced for European insurance companies in 2012, in the form of Solvency II.

In addition, legislators on both sides of the Atlantic have published new rules on over-the-counter derivatives. The Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in the US in July, while the European Commission released its proposed rules in September. Both have central clearing at their heart – requiring vendors to allow systems to link directly to a variety of processing and settlement systems, as well as clearing houses. “We recently helped design, develop and implement an OTC derivatives clearing service for a large clearer with very large volumes and near real-time risk analysis,” says Edde.

The Dodd-Frank Act also requires that any swap subject to the clearing requirement must be executed on a designated contract market – essentially an exchange – or a swap execution facility.

These are loosely defined in the legislation as a trading system or platform in which multiple participants have the ability to execute or trade swaps by accepting bids or offers from multiple participants. A number of trading platforms and interdealer brokers have already taken steps to meet the criteria. These requirements are forcing a step-change for derivatives trading and risk management technology within banks, say vendors.

In many cases, risk pricing and credit, capital and balance-sheet impact need to be communicated to traders in the front office before a deal is finalised – requiring as close to real-time risk analytics as possible.

Some vendors have developed systems that integrate a number of functions to give dealers all the information they need before a transaction closes. Data is crucial to all of this. Banks need plenty of accurate, clean data for risk systems to work to their full potential. But risk managers – and technology vendors – need to be aware there are often holes or even flaws in the investments in technology. Asset managers and hedge funds are also raising their game to meet investor demand for increased transparency, says Paul Compton, head of product management for alternative investments at SunGard.

Although the new regulations are primarily aimed at tackling liquidity riskv, counterparty credit exposures and capital shortages, the sheer volume of the requirements poses its own operational risks for institutions, suggest some participants. All the trends of the past year – consolidation of systems, a demand for high performance and scalability, and an increased focus on cost of ownership – will continue over the coming 12 months. Ongoing reviews of technology requirements are likely to result in the culling of existing systems – and this could have an impact on which firms appear in next year’s survey. ●

Technology vendors have had to make major changes to their products to ensure they are compatible with the raft of new regulations about to hit the financial sector – all at a time of shrinking IT budgets within some banks. In this environment, Thomson Reuters retains its lead in this year’s rankings, but Murex is close behind. By Clive Davidson

The age of change

www.murex.com 2

Rank Vendors 1st places 2nd places 3rd places1 Thomson Reuters 7 9 6

2 Murex 6 11 43 Algorithmics 4 5 5

4 SunGard 3 5 2

5 Bloomberg 3 1 9

6 Moody’s Analytics 3 2

7 Misys 2 1

8 Wolters Kluwer 2

9 Sophis 1 1

10 Numerix 1 1

=11 Calypso 1

=11 EBS 1

=13 Barx 1

=13 SAS 1

=15 Chase Cooper 1

=15 FXall 1

=15 Markit 1

=15 SavvySoft 1

overall

TradingActual results (%)1 Murex 15.12 Thomson Reuters 14.6

3 Bloomberg 11.1

4 Misys 9.2

5 Calypso 9.0

6 SunGard 8.6

7 Sophis 7.3

8 Open Link 6.2

9 SuperDerivatives 5.1

10 Wall Street Systems 4.8

Pricing and analyticsActual results (%)

1 Thomson Reuters 14.8

2 Murex 13.83 Bloomberg 13.4

4 Numerix 9.9

5 SavvySoft 9.4

6 Sophis 7.1

7 Calypso 6.8


9 Misys 5.4

10 SunGard 5.2

Enterprise-wide risk management (excluding operational risk)

Actual results (%)1 Algorithmics 14.5

2 SunGard 13.8


4 Murex 12.45 Misys 9.4

6 Moody’s Analytics 8.5

7 SAS 6.8

8 Bloomberg 6.4

9 Calypso 5.5

10 Sophis 4.4

How the poll was conducted

Risk polled thousands of banks, hedge funds, pension funds and insurance companies for this year’s technology rankings, and received 2,036 valid responses.

Respondents were asked to vote for the technology vendors that provide the best product offering across a number of categories, including enterprise risk man-

agement, risk capital calculation, front- to back-office trading systems, and pricing and analytics.

Participants were asked to base their votes on functionality, usability, performance, return on investment and reliability. Nominated technology companies

were awarded three points for a first-choice vote, two for a second-choice vote and one point for a third-choice vote.

Only technology end-users were allowed to vote. Risk conducted a comprehensive due diligence process and disqualified any votes that were felt to be unfair.

These include people voting for their own firm, or relatives of someone who works in that company voting for the firm, multiple votes from the same person,

multiple votes from the same IP address, proxy votes on behalf of customers, votes from people using Hotmail or Gmail accounts, votes by people who choose

the same firm indiscriminately throughout the poll without due consideration, votes by people who are clearly not involved in the business areas covered by the

poll, and block votes from groups of people on the same desk at the same institution voting for the same firm. The editor’s decision is final in determining the

validity of votes.

3 Reprinted from Risk December 2010

trading systems – front to back office

Commodities2010 2009 Vendor %1 1 Murex 15.82 2 Thomson Reuters 15.4

3 Bloomberg 13.2

4 3 Calypso 11.2

5 4 Open Link 10.5

Credit2010 2009 Vendor %1 2 Murex 16.82 3 Thomson Reuters 16.2

3 5 Bloomberg 12.8

4 1 Calypso 12.1

5 4 Misys 9.4

Equities2010 2009 Vendor %1 1 Sophis 15.3

2 2 Murex 12.73 5 Bloomberg 12.3

4 3 Thomson Reuters 11.1

5 4 SunGard 9.6

Forex2010 2009 Vendor %1 1 Thomson Reuters 16.9

2 2 Murex 13.83 Bloomberg 12.7

4 3 Misys 10.8

5 4 SunGard 10.2

Inflation2010 2009 Vendor %1 na Misys 16.8

2 Murex 16.03 Thomson Reuters 12.8

4= Bloomberg 9.4

4= Calypso 9.4

Rates2010 2009 Vendor %1 1 Misys 16.2



5 4 Calypso 9.9

Structured products2010 2009 Vendor %1 1 Calypso 18.0

2 2 Murex 17.43 3 Thomson Reuters 13.4

4 Bloomberg 10.9

5 4 Misys 10.6

Cross-asset2010 2009 Vendor %1 1 Thomson Reuters 17.3


4 3 Calypso 10.1

5 5 Misys 8.9

Pricing and analytics

Commodities2010 2009 Vendor %1 2 Bloomberg 16.7


4 4 SavvySoft 10.3

5 5 Sophis 9.1

Credit2010 2009 Vendor %1 1 Murex 16.92 3 Thomson Reuters 14.8

3 Bloomberg 12.6

4 4 Calypso 10.6

5 5 Numerix 10.1

Equities2010 2009 Vendor %1 4 Bloomberg 15.8

2 1 Sophis 14.7


5 Numerix 9.8

Forex2010 2009 Vendor %1 1 Thomson Reuters 14.3

2 2 Murex 12.53 3 Bloomberg 11.3


5 5 Numerix 9.1

Inflation2010 2009 Vendor %1 na Thomson Reuters 16.4

2 Murex 16.03 Bloomberg 15.3

4 Numerix 11.5

5 SavvySoft 10.7

Rates2010 2009 Vendor %1 1 Thomson Reuters 16.4

2 4 Bloomberg 14.1

3 2 SavvySoft 12.5

4 3 Murex 11.75 Numerix 9.7

www.murex.com 4

Pricing and analytics cont.

Structured products2010 2009 Vendor %1 1 Numerix 15.2



5 2 SavvySoft 10.0

Cross-asset2010 2009 Vendor %1 2 Murex 15.72 3 Thomson Reuters 14.1

3 4 Numerix 12.0

4 1 SavvySoft 11.5

5 5 Calypso 9.6

enterPrise-Wide risk management

Enterprise-wide market risk management 2010 2009 Vendor %1 1 Algorithmics 15.9


3 3 Murex 12.84 4 SunGard 10.6

5 Bloomberg 9.5

Enterprise-wide credit risk management 2010 2009 Vendor %1 1 SunGard 15.7

2 2 Algorithmics 15.2


4 4 Murex 12.45 3 Moody’s Analytics 11.5

Credit value adjustment calculation2010 2009 Vendor %1 na SunGard 15.8

2 Algorithmics 14.1


4 Murex 10.95 Misys 10.4

Liquidity risk management 2010 2009 Vendor %1 3 Murex 15.62 2 Thomson Reuters 14.7


4 5 SunGard 13.2

5 Misys 10.9

Risk aggregation: market, credit, counterparty,liquidity, operational 2010 2009 Vendor %1 1 Thomson Reuters 16.1



5 5 SAS 11.0

Risk dashboards2010 2009 Vendor %1 1 Algorithmics 16.1



5 Bloomberg 10.4

others

Limit checking2010 2009 Vendor %1 1 Murex 16.32 2 SunGard 14.1


4 Misys 13.0


Collateral management – in-house 2010 2009 Vendor %1 1 Algorithmics 16.0


4 Misys 12.1

5 4 SunGard 11.2

IAS compliance 2010 2009 Vendor %1 1 Thomson Reuters 15.2

2 4 SunGard 14.6

3 Misys 13.4


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Technology Rankings 2010Number one overall

Collateral management

Technology Rankings 2010Number one overall

Trading systems

Number one overall•Trading Systems•Cross-asset Pricing & Analytics •Liquidity Risk Management•Limit checking

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Risk Technology rankings 2010