Sellside Builds Out Analytics08.12.2011
Sellside trading platforms are incorporating industrial-strength risk analytics in order to enable broker-dealers to better manage derivatives positions.
A case in point is Fidessa, which has integrated derivatives pricing analytics from Fincad into its sellside trading platforms.
The partnership is intended to provide sellside firms with access to industry-standard options pricing and associated risk analytics to enhance their benchmarking and multi-asset trading capabilities for global futures and U.S. equity options.
The new market access rule, SEC 13c3-5, has mandated the need for real-time pre-trade risk management for equities and equity options. “Fidessa anticipates increased demand for order management, workflow and connectivity solutions as Dodd-Frank regulatory changes create competitive forces between SEFs,” Dan Smalley, director of business development for enterprise services at Fidessa, told Markets Media. “An integral part of such a service will be to provide valuation and analytics across a wide range of instruments.”
The built-in analytics increases Fidessa’s flexibility in implementing complex risk calculations.
“The depth of Fincad’s coverage allows users to remain ahead of the game as Dodd-Frank and other regulations begin to have a real impact on the marketplace,” said Smalley.
The enhanced analytics will also allow Fidessa to offer a more sophisticated set of algorithmic trading and hedging tools.
“To enhance the sellside offering, Fidessa built an analytics engine for options pricing and risk,” said Smalley. “Currently, it’s provided as an integrated service to the trading platform. It will be offered as a standalone framework in the future.”
Fidessa also makes Fincad’s pricing library available across its complete LatentZero buyside suite to calculate prices, sensitivities and cash flows for derivatives, money market and other fixed income asset classes.
Fincad issues multiple releases per year based on changing factors in the marketplace as well as customer demands.
For example, in its latest releases of Analytics Suite, the primary focus was on the changes to valuation driven by pricing off of overnight indexed swap (OIS) rates.
“We added the ability to price trades using discount curves built using the OIS rates, which the market feels better reflects risk,” Gurpreet Banwait, senior global product manager at Fincad, told Markets Media. “In addition, late last year we made architectural changes to Fincad Analytics Suite 2011 to enable the rapid development of new functionality.”