global markets summit · 2018-03-02 · sapient global markets • division of sapient corporation...

© COPYRIGHT 2011 SAPIENT | CONFIDENTIAL

Global Markets Summit 30 November 2011

2 © COPYRIGHT 2011 SAPIENT | CONFIDENTIAL

Sapient Overview Sapient Global Markets

• Division of Sapient Corporation

• Singular focus on clients participating in or regulating the commodities and capital markets

• Advisory, program management, analytics, technology and operations services covering all facets of trading and risk management across all asset classes

• Solutions delivered by industry practitioners with deep domain expertise

• 3,000+ people worldwide

Sapient

• Founded in 1991

• On NASDAQ (SAPE) since 1996

• Market cap of ~ $1.6bn

• 2010 revenue of USD $823M

• Fortune 2,000 client base

• Approaching 10,000 people worldwide

London

Düsseldorf Münich

Los Angeles

New York

Chicago

Atlanta

Houston

Denver

Washington

Boston Asia

North America

Europe

Toronto

Bangalore

Dubai

Kansas City

Miami

Amsterdam

Zürich

Stockholm

San Francisco

Noida

Moscow

Shanghai

Sydney

South America

Australia

Singapore

Calgary

Geneva

New Delhi

Brisbane

Melbourne


Navigating Into 2012

Front (and Back) Office Beware...

Volcker Rule

Cost of Clearing

Transparency Req‟s

Front Office Changes


"Bankers know when they're doing a proprietary trade, I assure you.“

"If there are big unhedged positions constantly, then it's proprietary trading.“

"Why did they buy it and why are they holding onto it that long?“

- Paul Volcker

Industry facts: • Over 2000 Banks are affected by this rule and are facing annual legal &

compliance costs of varying degrees • 152 national banks would have to realign their investments in private equity

and hedge funds to comply with Tier 1 capital restrictions


Summary of Permitted and Exempt Activities

The rules were designed to prohibit banks’ proprietary trading activities and released in October 2011 with comments due in January 2012 and are expected to be effective in July 2012 • There is a 2 year conformance period that applies to all covered trading activities. By July 21, 2014, all

proprietary trading activities must be divested or conformed. • There are up to 3 one year extensions, so by July 17, 2017, prohibited proprietary trading activities

would have been granted all of the 1 year extensions and the by this date must be divested or conformed.

Permitted • Cash Loan • Spot Commodity • Spot FX/ CCY • Repo / Reverse Repo • Securities Lending Liquidity

Management • CCP Clearing

Exempt • Underwriting • Market Making • Hedging • Trading in Government Obligations • Trading on Behalf of Customers • Trading by Insurance Companies • Trading Outside of the US

The Volcker Rule – Guilty Until Proven Innocent


Trading solutions will require both pre-trade compliance and post-trade review to dynamically monitor transactions throughout the day. • Initial focus is on post-trade, supporting

real-time and intra-day batch process

• Source key information to identify the data elements required for further compliance analysis

• Pre-trade compliance checking would require more integration

• Reports are automatically generated at different points to satisfy requirements

• Compliance and reporting would

eventually build up to real time pre-trade reviews and real-time reporting after the initial compliance program is in place

Enhanced

Reporting

Governance

Compliance

Vo

lck

er

Ru

les

En

gin

e

En

ric

hm

en

t L

aye

r

Systems

Calypso OpenLink GMIBroad-

ridgeOthers

Existing

Regulatory

Reporting

Env.

Regulatory

SubmissionReference Data

FO Systems

Existing Pre-and Post-Trade Compliance Rules

Monitor

Mgmt.

Reporting

The Volcker Rule – Guilty Until Proven Innocent


The Cost of Trading and Clearing in the New World

Trade R

epo

sitories

LEI

OTC Market

Banks & Investment Firms

Registration • Analyse criteria to be a

Major Swap Participant, Swap Dealer or Financial Institution

• Action plan to register

Clearing • Portfolio impact analysis • CCP selection, global

and regional • Intermediary selection

(FCM or DCO) • CSA impact analysis • Capital charge analysis • Initial Margin estimation

– tools from CME, LCH • Consider offering client

clearing

Trade Reporting • Learn about the offerings

from DTCC, ICE, CME and REGIS (Spain), regional and global offerings

• Technical impact analysis • Implementation planning

Trade Execution • Review SEF offerings • Front office technical impact

analysis • SEF selection • Implementation planning • Consider offering or

integrating to a SEF aggregation platform

Identifiers • Understand current state of

proposals for UPIs, USIs, and LEIs

• Technical impact analysis • Implementation planning • Enterprise Data management

infrastructure most likely requires an upgrade

Internal Investment Program • Assign organizational

ownership of impacts • Create steering group • Assign investment priorities • Create levelled resource plan • Create education plan • Create communication plan



• Many processes in place will require automation to integrate to workflow systems


• Selecting a CCP and an intermediary to provide access will complete your post-trade infrastructure

• Trade reporting is also coming, along with LEIs, UPIs and USIs

• Expect to pay substantial legal fees for reviews of existing agreements

• Selecting a CCP will tend to follow asset class, there are leaders in Rates and Credit now, but new entrants are likely to change the balance

• DTCC, ICE, CME and REGIS are operating Trade Reporting platforms, with more movement in Europe possible in 2012, reporting is a mandatory requirement

• Interoperability, cross margining and collateral netting to the benefit of the trader is a distant goal

• Efficient use of capital is in your institutions hands to formulate and execute, the net result is likely less capital to work with


Client

Central Counterparty Landscape for OTC Products

US &

Canada

ICE Clear

CME

NYPC (DTCC / NYSE)

IDCG (Nasdaq)

CDCC

ICE Clear

Eurex

LCH.Clearnet

CME

NYSE Liffe BClear

KDPW (Poland)

OMX (Nasdaq, Sweden)

Europe

HKEX

SGX

JSCC

Asia

CDS iTraxx CDXEquity

OptionsFXIRS

$1trn $11trn

$48m$62bn Plans

Plans

- Plans

$1.3trn $7trn

Plans Plans Plans

Plans $10m $85m Plans

$68bn Plans$300trn

-

Plans

Plans

Plans

Plans

- -

-

- Live but figures not available

-

Open position, all others are notionals


• Whilst trade reporting obligations are not yet clear under EMIR, Dodd Frank provides a very

prescriptive view in terms of content and timeliness

• The role of a TR (or “SDR” under Dodd-Frank) will be to collate data from Market participants to

provide public and regulatory reporting

• ISDA RFP‟s are in-flight to create „industry preferred‟ TR‟s though a number of jurisdictions have

announced local TR‟s due to issues/concerns with cross-jurisdiction data sharing

Industry Mandated SDR for Relevant Asset Class

Real time price

disseminationplatform

Other regulator

mandated public reporting

Regulator portal

Markets Participants(Bearers of Statutory Reporting Responsibility)

SEFs

DCOs Reports,Recon,Query,

Tracking

real time

basic data

regulatory reporting

detailed data daily updates from DCOs

real-time and

regulatoryreportingnot otherwise

covered

Red arrows

potentially

intermediated

through confirm

or middleware

providers

Dodd-Frank Requirements

Trade Repository Landscape

Source: Mserv industry presentation - Jan 2011 Source: Mserv industry presentation - Jan 2011

Transparency Requirements: “This is a hold-up – give us all your data!”


TRANSACTION REPORTING HUB

Data Sourcing

Import Txns

Exception – I

Store

Normalise

Filtering

Rules

Reportable

Txns

Audit Trail

Validation

Rules

Validate

Exception - II

Audit Trail

Enrichment &

Transformation

Import Static

Fill Gaps

Submission

Intermediary

Response

Handling

Exception - III

Audit Trail /

History

Transform

Multiple

Regulators

MI & Analysis

Completeness Accuracy

Exception Management Workflow

Configurable

Workflow

Notification &

EscalationManual Overrides

& Audit Trail

3rd

P

A

R

T

Y

I

N

T

E

R

M

E

D

I

A

R

Y

R

E

G

U

L

A

T

O

R

(s)

QA / F2B Testing (Completeness & Accuracy embedded in TRHub)

Executive Forum (Quarterly)

Daily Monitoring / Assessment & Change (Quarterly)

Regulatory Reporting Forum (Monthly)

Full F2B

Trade

Life

Cycle:

New

Cancel

Amends

Exceptions

Exceptions

Governance

Top down Assurance

People

Staff Awareness & Training

Bottom Up Assurance

Accountability &

Delegated Strategy

Roles & Responsibilities

Budget Allocation

Horizon Scanning

Change to BAU

Industry Interaction

Regulatory Interaction

So

urc

e S

yste

ms

Re

fere

nce

Da

ta

Syste

mG

eo

gra

ph

yP

rod

uct

Clie

nt

Instru

me

nt

Exch

an

ge

Transparency Requirements: “This is a hold-up – give us all your data!”


Front Office Changes – SEF Integration

• The trading and post-trade landscape are changing more quickly than ever, new SEF ventures are being spoken of on a weekly basis

• Choosing a trade execution platform, and subsequent integration will be key in 2012

• It is unlikely that from the onset all the SEF platforms coming to market will capture sufficient liquidity to be viable, yet you need to select one.

• Market is seen to mature to 3 or 4 viable SEF’s per asset class

• Another option is to find a SEF aggregator, a firm who will provide access to multiple SEFs

Swap Execution Landscape

Credit Equity FXRates

Bloomberg ✔

CreditEx (ICE)

Eris Futures

Javelin

MarketAxess

ODEX

TradeWeb

Thomson Reuters

BGC

GFI

Tullets

Tradition

ICAP

TeraExchange

✔

✔

✔

✔ ✔

✔

✔

✔ ✔ ✔

eDeriv ✔

✔

Maybe

Maybe

Maybe

✔

Energy

✔

Maybe


Front Office Changes – Counterparty Risk

Impact of CCP’s

• Trade netting and aggregation approach at CCP and client level

• Dispute and margin call workflow setup with CCP and clients

• Cross margining across multiple asset classes / CCP platforms

Collateral Management

• Increased capital requirements

• Provide the ability to assess the collateral impact based on available SEF / CCP

CVA Hedging

• Focus area that is being made more complicated based on the changing landscape


Front Office Changes – Data Visualization

Drivers • More data, less insight

• Increasing trading complexity and

decreasing productivity

• Emerging technology including:

WPF, Silverlight, Flex, HTML 5

• Mobile technology and social

media

Examples • Money market trading interfaces

• Analytic tools and components that

can be shared and modularized

across multiple user types

• Portfolio analysis & research tools

• Futures and options dashboards

• Trading and risk analysis

visualization

• Dynamic trade activity and more

relevant, contextual alerts


We offer a full set, or combination, of solutions required to envision, design, build, test and

support a project across a number of practices.

Market Initiatives and Infrastructure

Energy & Commodity Trading Platforms

• Energy and commodities advisory • ETRM package integration • OpenLink, SolArc

Derivative Platforms

• Advisory across all asset classes and functions • System integration, application management and

managed services • Implementation and upgrades • QA testing framework • Murex, Calypso, Summit

Investment Management

• Advisory across all asset classes and investment lifecycle

• Bespoke platform development • Systems implementation, integration and

application management • Bloomberg, Charles River

Portfolio Accounting

• System integration, performance tuning • Implementation, migration, upgrades • Application Management • Advent Geneva, SimCorp Dimension

Market Initiatives & Infrastructure

• Industry issue-specific support, such as Counterparty Clearing

• Industry regulations advisory • ISDA PMO

Trade and Transaction Reporting

• Advisory on regulatory transaction reporting • General risk assurance methodology (including

execution & remediation) • Preparation for regulatory or external audits

Trade Documentation

• Advisory on Audit, Vendor Selection & RFP Management, Design, Integration, Implementation

• Portfolio Review, documentation SME support • Thunderhead, Scrittura, WSI

Valuation & Risk Analytics

• Advisory and Technology • System implementation • Numerix, Fincad, S&P Analytics-on-Demand

Visualization

• Highly integrated and visually rich interface design • Front-end technical advisory • Research and design

Data Management

• Data strategy and transformation • Data governance and quality • Business intelligence and analytics • Master and reference data management

Program Management Operations Advisory Program Management Analytics Technology Operations

Sapient – A Proven Partner for the Changing Landscape


• We have practical delivery experience in the areas required to deliver the right solutions to help your firm navigate the changing trading landscape

Several Large Investment Banks:

Reengineered the way companies control data and provide reporting to regulatory bodies. Core assignments to

upgrade derivatives trading platforms, valuation analytics and margin control

Several Large Asset Managers and Hedge Funds:

Legal and Compliance definition and architecture planning for

pre-trade compliance checks across several applications. Risk

management advisory work to achieve trading objectives

European Central Bank (ECB):

Sapient is engaged to design and build the European

DataWarehouse to facilitate risk assessment and

improve transparency standards for Asset Backed

Securities (ABS)

G-8 Central Bank:

Sapient is engaged to provide advanced

risk modeling overlaying bespoke data warehouse

technologies while providing continued support

for the system

DTCC:

Sapient is engaged to provide the strategic

advisory, business consulting expertise,

requirements development and PMO support

Canadian Banks, Buy-side Firms & Regulators:

Provided strategic advisory, business consulting

expertise, and PMO support to CMIC “Canadian

Market Infrastructure Committee”

Sapient – A Proven Partner for the Changing Landscape


Thank You

Josh Sutton

[email protected]

+1.312.315.6914

global markets summit · 2018-03-02 · sapient global markets • division of sapient corporation...

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