Client Case Study

Credit Derivatives Platform

Custom Application Development

www.datainc.biz | 201-802-9800

The Challenge

A global market leader and innovator in the trade execution of credit derivatives faced a challenge with its partners and asset managers. Overall, the process to execute trades was slow and cumbersome, encom-passing multiple steps in an antiquated process and system.

Specifi cally, with the requirement to allocate trades across a large number of funds among clients, asset managers faced myriad challenges encompassed by a high failure rate of execution due to allocations be-ing inaccurately captured and submitted by their dealers. Conversely, dealers often complained of delays in receiving allocation notifi cations back from their dealers.

“The fi nancial industry, especially the credit-derivatives portion is fast-paced” said Michelle Mitra – CTO of DATA Inc. “The previous version of the application, while to an extent effi cient, did not accurately refl ect the business process followed by the asset managers in particular and client services in general.”

The Solution

DATA Inc. technologists worked with key client stakeholders to scope out, develop, test and deliver a multi-client, post-trade communication and electronic affi rmation platform for credit derivative trades. The solu-tion, developed over a 2 ½ month time-span was designed to facilitate timely and accurate capture and messaging of trade data; ultimately the cause of the operational challenges experienced by asset managers when using credit derivatives as part of their portfolio management.

This Credit Derivatives platform enabled dealers to allege new trades against their customers, who were in turn able to verify key economic trade details, and affi rm and allocate trades electronically. Robust messag-ing was inserted to facilitate timely dispute resolution.

www.datainc.biz | 201-802-9800

Credit Derivatives Platform

Client Case Study

“The previous version of the application, while to an extent effi cient, did not accurately refl ect the business process.” - Michelle Mitra - CTO

Client Case Study

Find us on Facebook, LinkedIn, and Twitter

Credit Derivatives Platform (...continued)

Additionally, the Credit Derivatives platform was designed to bring benefi ts to both paper and electronically executed documentation. By providing a two-way automated link to DTCC for trade messages, the client reduced the need for manual intervention or spreadsheet uploading, and greatly enhanced STP. Since the trades are affi rmed and allocated in advance, the match at DTCC would then be guaranteed since both par-ties submission was identical. In the case of paper trades, the accuracy of the documentation was also im-proved due to the revision of trade details; which through the solution were now accurately recorded within a timely manner prior to documentation being sent out by the drafting party.

The solution adhered to the 2005 ISDA Novation Protocol, and the novation/termination process in general which was a key pain point for Asset Managers. Now, due to the robust workfl ow messaging designed into the solution, the compliance process with the ISDA Novation Protocol was effectively consolidated from a multi-step time-consuming process into a three-click exercise. The solutions multi dealer platform and mul-tilateral approach also added signifi cant value to all sides in the transaction.

The Result

The functionality and workfl ow that the Credit Derivatives Platform offered allowed dealers to improve cus-tomer service to their Asset Manager customers through the accurate capture and messaging of new trades, allocations, terminations and novations. This has signifi cantly reduced time and saved the client money in processing Credit Derivatives Trades. Additionally, several major banks and brokerage institutions were able to adapt and start using the platform to on-board their clients.

“This solution is just one example of the many we have developed end-to-end on behalf of our clients” said Michelle. “Our experience and expertise in the fi nancial industry, coupled with our steadfast technology team have resulted in a quick turnaround and solution that provided an effective streamlining of the process associated with derivatives trading.

Technologies and Methodologies Used Effort (i.e. person months) - JAVA, Swing, XP Development - 10 Months

© Copyright DATA Inc. 2010 This publication and its contents are proprietary to DATA Inc. No part of this publication may be

reproduced in any form or by any means without the written permission of Data Inc. 72 Summit Ave, Montvale, NJ 07645