Technology survey

Technology
triumphs
>

In times of crisis, an investment in technology appears to be a

safe bet. Odd as it may sound, if you are planning to be in
business as the cycle turns and you are faced with a slowing down
of business then the smart money invests. And technology is the
easiest and most useful beneficiary.
Nice as that may sound, investment in technology by structured
products houses over the past two years has been a touch more
complicated than this rationale. The reality for many producers of
financial products is that they have been bombarded by regulations
and directives that all point to the introduction of not only greater
speed but also improved transparency.
The need for transparency has also been driven by investors, who
have asked banks to develop products with less default risk and risk
transfer. As well as wanting to know the name of the bank that has
issued the structured product they might buy, these investors want
to be sure that they are cleanly separated from risk that they do not
think should be theirs.
The financial crisis has also required greater investment for most
structured products houses in the fund business. Previously happy
to quickly flick out new products, these banks have had to come to
terms with credit risk and the desperate desire that many investors
have had to avoid this at all costs. It is easy enough to say that you
will therefore expand your fund business, but it is harder to spend
money on investing in what is a very expensive, commodity business
that works on relatively lowmargins.
But the biggest investment in technology has been reserved for
risk management systems. With investors demonstrating various
degrees of paranoia about the possibility that they could easily lose

REPRINTED FROM | STRUCTURED PRODUCTS | APRIL 2011

Top 10 technology vendors

Rank
1
2
3
4
5=
5=
7
8=
8=
10=
10=

Vendor
Murex
Numerix
SunGard
Pricing Partners
Algorithmics
Sophis
Misys
Calypso
Thomson Reuters
Bloomberg
Modelity

all of their money, they need comforting. And in choppy financial

markets, if you are the one taking the risk of issuing and hedging
new products, extra care is required. The only practical way to
resolve all of these concerns is to step up the amount of time and
money that you are willing to invest in risk management systems.
Richard Jory,
Editor

The focus on risk, particularly the counterparty credit kind, along with
performance challenges and the need for transparency and continued innovation
are all highlighted in the second annual Structured Products technology survey.
Clive Davidson talks to technology providers about their solutions. Research was
provided by Ana Mendes and Beatrice Leedell
>

Innovation is back in the structured products market and

complexity never completely went away. So say the technology
vendors that serve the market and who must keep their software in
line with the requirements of its participants. However, the innovation
is happening in new areas in underlyings rather than payout
structures, in those areas that were slower off the mark to create
structures such as forex and commodities, and in fund-based
products. And the complexity is in the portfolios of products created
before the financial crisis and the flight to vanilla products portfolios
which cannot just be wished away, but must be even more accurately
valued and carefully managed.
Meanwhile, regulators have been stepping up their demands,
particularly in the area of capital to cover counterparty credit risk,
resulting in the need to calculate credit value adjustments (CVAs) on
trades. This can be complex and computationally demanding,
especially if performed pre-trade, and therefore requires sophisticated
analytics and a high-performance processing environment.
It is in this environment, where software vendors have been
stepping forward with new technologies to help their clients meet
these challenges, that the 2011 Structured Products technology vendor
rankings have taken place. The results, which you can read on the
following pages, are our readers verdict on which technology vendors
best helped market participants achieve their business goals.
This years winners are mostly familiar names, although there was
significant movement in the individual placings, demonstrating that
this is not a market where vendors can rest on their laurels.

Murex on top
Overall winner was Paris-based front-to-back-office system vendor
Murex. The company dominated the trading system section and
appeared in the top five in half the pricing and analytics categories,
as well as in the credit risk management, limits and collateral
management categories. Just pipped into second place was New
York-based Numerix, which featured strongly in all the pricing
and analytics categories and won both the market and credit risk
categories. Third was Pennsylvania-based SunGard, which was placed
across more categories than any other vendor, demonstrating the
breadth of its product suite, just beating off Paris-based Pricing
Partners, which won all but the equities category in the pricing and
analytics section.
Meanwhile, last years winner, London-based Misys, slumped from
first to seventh place overall. However, this situation could well turn
around in the coming year following the firms recent acquisition of
Sophis, the Paris-based front to back office system vendor. Sophis

GPUs make it possible to manage

[books of complex products] in
quasi real time instead of once or
twice a day, and allow enough
Monte Carlo simulations [to take
place] to get smooth gamma for
better risk management
Maroun Edde, Murex
shared fifth place overall with Toronto-based Algorithmics the
highest ranking of the dedicated risk management vendors.
For Murex, the past year has seen a continuation of trends that have
been in place since the financial crisis, says group chief executive
Maroun Edde. While there is an ongoing move towards less complex
products, there is still a demand for new structures. But time to market
is critical. Developers need to be able to create new products quickly,
and with minimal programming. Here, Murex clients have benefited
from the companys recently introduced scripting language that
enables them to create structures by describing the payout only, while
the system automatically generates contract events, confirmations,
settlements, and so on. In addition, Murexs technology enables
developers to rapidly bring new structures into a production
environment that provides accurate and timely pricing, hedging, risk
management, collateral management and back-office processing
something that is an absolute necessity in todays risk-focused
market,says Edde.
Another major trend is the need for a massive acceleration in
calculations, says Edde. Clients want fast and accurate pricing and
calculation of risk sensitivities such as credit Value-at-Risk. In response,
Murex has invested heavily in porting its pricing and risk code to
high-performance computing environments, including graphical
processing units (GPUs) lightning-fast parallel-processing
microprocessors originally designed for computer graphics, but well
suited to financial computation because many of the calculations, like
graphics, are also essentially parallel in nature. The use of GPUs has led
tocalculation speed increases of between 60 and 300 times, making
it possible to manage [books of complex products] in quasi real time,
instead of once or twice a day, and allowing enough Monte Carlo
simulations [to take place] to get smooth gamma for better risk
management, says Edde.

STRUCTURED PRODUCTS | APRIL 2011

Technology survey

Trading systems cross-asset

Murex

SunGard

Misys

Trading systems FX

19.3%
13.1%
12.4%

4 Calypso Technology
5

9.7%

Thomson Reuters
5

10

15

20

Thomson Reuters

SunGard

Misys

Sophis

Murex

7%

SunGard

Bloomberg

5.5%

Bloomberg

4= Calypso Technology

5.5%

ORC Software

OpenLink

5.5%

Murex

Sophis

SunGard

4=

4=

22.7%
10.2%

9.9%
7.3%
6%
5

10

15

10

15

20

10.8%
8.3%
7.6%
5.7%
5

10

15

20

25%

25%

19.3%

Murex

17.9%

Misys

Bloomberg

18.8%
12.7%

3=

Bloomberg

10.7%

Murex

3=

Misys

10.7%

Thomson Reuters

9.7%

10%

SunGard

9.1%

SunGard
0

25%

Trading systems rates

1 Calypso Technology

20

22.9%

Trading systems credit

14.6%

Trading systems equities

23.8%

25%

Trading systems commodities

Murex

5 Calypso Technology

8.3%
0

10

15

20

REPRINTED FROM | STRUCTURED PRODUCTS | APRIL 2011

25%

10.3%

10

15

20

25%

Pricing and analytics equities

Sophis

Murex

Numerix

Pricing and analytics Commodities

20.9%
9.3%
8.2%

Pricing Partners

Numerix

SunGard

6.3%

37.2%
17.5%

4= Pricing Partners

7.1%

Murex

5.7%

SunGard

7.1%

Bloomberg

5.4%

4=

10

15

20

Pricing and analytics FX

Pricing Partners

Numerix

SunGard

Murex

17.5%
6.3%
5.7%
5.4%
0

5 10 15 20 25 30 35 40%

Risk management credit

37.2%

3 Thomson Reuters

25%

5 10 15 20 25 30 35 40%

Numerix

15%

SunGard

14.1%

Algorithmics

Murex

5=

Fincad

5.1%

5=

Sophis

5.1%

9.4%
5.6%

10

15

20%

Collateral management

Limits

SunGard

15%

1=

Algorithmics

15.7%

Murex

14.2%

1=

SunGard

15.7%

Algorithmics

12.4%

Misys

3= Thomson Reuters

12.4%

Murex

3=

5 Calypso Technology
5

10

8.3%

5 Calypso Technology

8%
0

10.2%

15

20%

6.5%
0

10

15

20%

STRUCTURED PRODUCTS | APRIL 2011

Overall Number ONe

25 years of focus on building a capital markets
platform, and on customer satisfaction.

THaNK YOu
FOr YOur cONTiNuOuS
SuPPOrT

Murex provides a complete cross-asset and front-to-back offer for structured products combining of out-of-the box
complex payoffs & models together with structuring tools and model & products catalogue extensors.
For more information, please contact us at info@murex.com

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