In January 2009 GL Trade became the Global Trading business of SunGard. Since then, the team has been working to integrate our product lines with other SunGard offerings: during 2010, for example, GL Net became part of the expanded SunGard Global Network, which now links a community of over 2000 buy-side firms to more than 500 brokers.

In 2011 SunGard is taking a further important step, and we have brought together all SunGard software product lines for trading on global listed markets under a single brand: Valdi. This means that all GL Stream products will change their names: The Reference Card linked here gives details.

This branding change will have no immediate impact on the products or service organization, but will open up new opportunities as SunGard furthers its development work. An important new Valdi product has already been introduced. The Valdi Execution Management System is derived directly from the GL Stream architecture and, extends the functionality offered by the GL Winway workstation for buy-side trading desks. It enables integration of the trading station into the workflow of the asset manager or brokerage firm that uses it, facilitating the management of care order and DMA flows across multiple markets and trading desks.

Your SunGard account manager will of course be pleased to help if you have questions about our move to Valdi. The Valdi pages on SunGard’s website also provide further information.

The global listed derivatives markets have experienced rapid growth during the past five years and in the first half of 2010 overall volume of trades increased by 23% compared to the same period in 2009. Month on month, derivatives markets in Europe recorded the strongest growth from April to May, climbing 32%.

According to the Futures Industry Association around 18 billion futures and options contracts were traded during 2009 (2009 Derivatives Exchange Volume Webinar, March 18, 2010).

The listed derivatives markets have, to a certain extent, risen at the expense of the OTC derivatives markets where the collapse of leading brokerage houses in 2008 highlighted the levels of counterparty risk in the OTC market. Firms have turned to listed derivatives, which they see as more secure and transparent.

However, this growth has exposed the manual nature of listed derivatives processing. While many advances have been made during the past decade to improve straight-through-processing (STP) rates in financial institutions’ back offices, some pockets of manual processing have remained. None more so than in the listed derivatives arena, where certain aspects of the option life cycle are characterised by labour-intensive, key-punching processes.

This can change with a unique solution from SunGard that automates the most challenging aspects of options processing, enabling firms to gain better control and monitoring of the option lifecycle.

Read the positioning paper for more information

Contact: guillaume.bunouf@sungard.com

The Solitaire du Figaro is a fantastic single-handed offshore race between France, Spain and Ireland. 50 skippers usually participate in the event sailing the same yacht, called the Figaro Beneteau…

Read more on the blog La Solitaire du Figaro, here

The increasing use of algorithmic trading and split orders, particularly in Europe with the post-MiFID emergence of new trading venues, has led to higher transaction volumes of smaller amounts. Trading on the mature markets of the United States and Asia (Singapore, Hong-Kong, Japan…), and on fast-growing markets such as India and Latin America, calls for the ability to cope with a large number of transactions. Financial institutions have no choice but to implement a highly scalable processing infrastructure to overcome the hurdles set by ever-growing volumes.

SunGard’s global trading business has designed a brand-new module to support very high trading and messaging volumes. At the database level, the latest advances in ORACLE technology have been used including partitioning and advanced queues. Innovative application design has been implemented to provide unprecedented levels of throughput.

What’s new?

Key areas have been enhanced to utilise in-memory processing and multi-threading capability. The interaction with the database has been designed to optimise throughput by the creation of new transaction commit cycles. In addition to overall high volume processing, users require the ability to set business-driven priorities for the processing of different types of transactions. For example, DMA transactions could be processed ahead of care orders or transactions for key clients could be processed ahead of the rest. It is now possible to work with users and manage peak loads according to their business priorities.

Stream RIMS Eon is especially designed for middle and back office’s 2010 new needs, such as the ability to capture high volumes of trades, in addition to the more traditional needs of setting up rules for the real-time calculation of charges and confirmations, as well as managing netting and smart settlement routing for multiple clearing venues.

The European financial community is witnessing steadily increasing fragmentation of liquidity in the equity markets: for example, over 40% of public-book trading in FTSE 100 stocks now takes place on the major MTFs. As a consequence, pressure is now growing from the buy-side and from regulators for brokers to include these new venues in their Best Execution policies.

Today, this is a European issue, but with Chi-X planning to launch three venues in Asia-Pacific this year it may soon be a more global one.

How to respond?

At SunGard we see the market pressure, and also the complexity and cost involved in multi-venue trading – which have caused many firms to hesitate. This combination is the driver behind Valdi Liquidity Solutions , a service suite that enables extremely cost-effective access to fragmented liquidity. The suite includes hosted market gateways, algorithmic trading and smart order routing services, all managed by SunGard in ASP, and provides a single access point to almost 100 percent of displayed liquidity.

This new approach strips out the operational and technology complexity that is normally involved, and provides unique flexibility in market membership options and commercial terms. Brokerage firms using the Valdi services are therefore able to reduce significantly the costs of managing fragmented liquidity, meaning that scale is no longer necessary for trading success.

More about Valdi Liquidity Solutions

Valdi Liquidity Solutions enable brokers to leverage fully their current client relationships, market memberships and connectivity, and at the same time take advantage of the full range of new possibilities in the fragmented markets. Just as important in current market circumstances, the way in which Valdi Liquidity Solutions are delivered enables firms to avoid much or all of the fixed cost increment that is normally involved in trading new markets.

The Valdi suite centers around the provision of Smart Order Routing capability, hosted and managed as a service, with no restriction or price implications on the number of exchanges and/or MTFs that the broker connects to. Market membership in each case can be the user firm’s own or that of a partner broker. Market memberships can be added wherever this makes business sense, and other firms’ memberships can be leveraged where it doesn’t.

Algorithmic trading capability is also provided via managed services, working closely in conjunction with the Smart Router and triggered by workstation users or in-house trading tools.

How it works

Orders can arrive from the brokerage firm’s clients, via FIX or SunGard trading workstations, or from in-house order management and trading systems. From this point onward in the order flow, the Valdi managed services come into play, accessed via SunGard’s global network. At Valdi’s entry point, trading strategies can be applied using the full range of capabilities of the GL Tactics and Open Tactics algorithmic trading suites.

All orders can then be sent either direct to markets or to the Valdi Smart Order Router for decisions on routing of child orders. The Router’s algorithms are continually optimized by SunGard’s market specialists, and then set for all clients, meaning that full mutualization of infrastructure is possible and cost-effectiveness is maximized. The Smart Router and associated Market Data Aggregator (which delivers the consolidated view of market depth to trading screens and applications) are core service elements.

Orders can then be passed either to SunGard’s ASP trading servers for execution under the user firm’s own name, with pre-trade risk management checks carried out by the high-performance GL Selector module, or – and this is where the Valdi suite’s unique flexibility kicks in – to a partner broker for the markets where the user firm does not hold membership (or where a partner’s higher aggregated volumes can achieve better transaction pricing). Order flow is routed to the partner with low latency via SunGard’s network.

For the cases where the user firm’s own memberships are used, SunGard offers managed and secured connectivity to all equities exchanges in Western Europe, all the significant pan-European MTFs and also several dark pools.

Valdi Liquidity Solutions are designed to make the move to full participation in the new European liquidity landscape straightforward and cost-effective. Brokers can leverage the services to improve client satisfaction, gain a new competitive edge and retain full flexibility to cope with further market evolution, while avoiding the large fixed investments that these normally require.

To find out more about SunGard’s suite of global electronic trading solutions, please visit www.sungard.com/globalelectronictrading

In an article written for Wall Street & Technology back in October 2002, SunGard made the following assertion: “Straight through processing (STP) is a strategic imperative today and is required by all financial institutions in order to achieve operating efficiencies, and reduce costs and operational risk.” It added: “STP can be achieved today within an institution by integrating its heterogeneous systems environment in the front and back office. STP can also be achieved today by seamlessly connecting the systems on the buy-side with systems on the sell-side and with settlement agents.”

Moving forward seven years to 2009, it is clear that STP is no longer just an operational imperative: in such a competitive environment as the financial markets, it is often a real business differentiator. But it is not always as easy to achieve as might be thought, for numerous reasons.

The allocation of trades by the sell-side to their client accounts is an example of where true full STP has sometimes been difficult to achieve. The end-client frequently wishes to have an order allocated to numerous complex accounts, and this has to be done swiftly. For exchange-traded instruments, particularly derivatives, this information also has to be sent to the clearing house to ensure efficient and accurate margin management.

Manual intervention is costly

This complicated process has often required a high degree of manual intervention. This is not only costly, but also potentially introduces operational risk. SunGard’s global trading business has recently launched a new application – the GL Stream Allocation module – to overcome many of the issues around allocation. GL Stream Allocation, which has already been installed and is working successfully at a major global full commission merchant, receives details of all orders and executions directly from GL Win and GL Stream trading workstations. These may have pre-defined instructions attached to them, or the system can automatically add allocation messages before the deals are processed through the middle and back offices.

The module is capable of handling a wide range of allocation types. These are:

• Pre-Allocation
• Pre-Trade
• Post-Trade Simple Allocation
• Allocation of a Part-Filled Order
• Post-Trade Complex Allocation
• Bulk Allocation

By allowing traders to enter allocations directly or have them generated automatically through the use of pre-defined parameters, a far higher degree of STP is achievable.

Another issue that has affected STP rates is the lack of standardization of product codes. Exchanges, data vendors, ISVs, regulatory and industry bodies and other third parties all assign their own identification codes to specific futures and options contracts. This means that market participants have to set up ‘trans-codification’ each time they interface two systems.

Code confusion

To do this manually is, as with allocations, ineffective on a cost basis and it also potentially leads to transcription errors. To address the issue, SunGard has introduced GL Instant Map. This combines the SunGard Fame Futures-Contracts Mapping data feed with a software connector for each SunGard system. The data, which consists of global exchanges’ and major third parties’ contract codes, is updated daily.

The two new modules have been designed to deliver efficiencies and synergies to client organizations by automating tasks that can hinder the smooth flow of transactions from the front office through to the middle and back offices. In other words, they can enable brokerage firms to plug two of the most persistent remaining gaps in STP.

In today’s financial landscape, it is imperative for financial institutions to be able to closely monitor and gauge risk and exposure at the firm level in order to react quickly and appropriately. Stream Credit Monitor provides real-time, cross-asset margin and credit functionality to help firms monitor and control risk in a holistic manner.

Daiwa is using Stream Credit Monitor, integrated with SunGard’s Phase3 solution, to manage collateral and monitor counterparty margin and exposure on its repurchase agreements or “repo” financing transactions for futures, equities and fixed income instruments on a single platform.

Nicholas Rubino, executive vice president and chief operations officer at Daiwa Securities America, said, “SunGard’s Stream Credit Monitor provides a single application for multiple asset classes that shows our total cross-product, cross-counterparty exposure in one place, even taking into consideration stock loan activity, interest rate swaps and total return swaps. Stream Credit Monitor has had a direct, positive effect on Daiwa’s bottom line and viability in an unpredictable market, helping to make us immediately aware of exposures.”

Stream Credit Monitor calculates margin requirements for each counterparty, monitors margin exposure and supports specific haircut requirements, accrued interest, and market value calculations to determine the margin or exposure amount for each counterparty. It is an intra-day and end-of-day margining solution that iterates from price and activity triggers, prompting the recalculation of strategy-based accounts taking advantage of sophisticated pairing rules.

Stream Credit Monitor helps financial institutions to enhance service to customers and reduce risk by producing timely and accurate measurements of requirement and excess. In addition to automated margin call issuance and resolution features, Stream Credit Monitor provides a deep set of workflow events used by managers to quantify their exposure and facilitate resolution workflow. Using continuous feeds from global markets, Stream Credit Monitor generates intra-day margin calculations, supports margin rules from the major exchanges worldwide, and integrates with most transaction processing applications.

Stream Credit Monitor is built on top of Stream, SunGard’s data aggregation framework, and is integrated with SunGard’s GMI and Phase3 solutions. With the upcoming integration of SunGard’s GL Ubix solution and Stream, Stream Credit Monitor will also work seamlessly with GL Ubix.

More information about Daiwa
Daiwa Securities America Inc. (DSA) is a corporation organized under the laws of New York, a broker-dealer registered with the U.S. Securities and Exchange Commission, a futures commission merchant (FCM) regulated as such by the CFTC, and a primary dealer in U.S. government securities. Daiwa is a member of the Securities and Exchange Commission, FINRA, NYSE Euronext, all regional exchanges, Chicago Board Options Exchange, Futures Commission Merchant, Depository Trust Clearing Corp., Fixed Income Clearing Corp., Options Clearing Corp., Mortgage Backed Securities Clearing Corp., and SIPC. Daiwa’s Global Clearing Network actively clears in 25 local markets as well as Euroclear.

Until now, it has not been possible to bring the same degree of automation to the post-trade processes of option that have been achieved in other exchange-traded derivatives, where GL Clearvision has brought real clarity. The main reason is because of the additional complexities around the whole process of option exercises and abandons. This is still manually intensive and as a result of the lack of automation, a very high level of operational risk remains in the post-trade option environment.

This situation has now changed with the launch of Options Watch. This innovative solution has been designed in partnership with a major global clearing firm and thoroughly road tested. Options Watch may ultimately revolutionise the post-trade handling of options in much the same way that GL Clearvision did for clearing other exchange-traded derivatives.

“For the first time, users of Options Watch will be able to monitor each step of the options management chain whether there are exercises, abandons and assignments and to fully automate their close-out processes,” says Laurent Jacquemin, Global Head of the post-trade services at SunGard’s global trading business.

There have been several high-profile incidents of institutions incurring losses as a result of incorrect exercises. Being able to fully automate the process helps mitigate operational risk substantially. Jacquemin says that there are also other business benefits to be gained from using Options Watch. It also allows users monitor their P&L far more powerfully and arguably accurately in their option exercise request.

“At the moment, back-office staff have to spend a lot of time – in some cases several hours – carrying out all the post-trade tasks around close out process. Options Watch works in real-time, so it really frees up staff to focus on more pressing or value-adding work”, he adds.

“This is a unique and powerful solution which can really add value to SunGard customers. Options Watch has the potential to completely revolutionise the post-trade options management,” concludes Jacquemin.

The advent of remote electronic access in the 1990s completely changed the way trading is done and also gave rise to a number of new requirements for the way that financial institutions monitor and control their risk. The rate of change has, at times, been staggering and one only has to take a brief peep into the history of electronic trading to see that risk management practices have not always managed to keep up, especially with some of the developments which have occurred at the front end.

Not only is the whole trade cycle now far more rapid, but brokers’ clients can also be trading on numerous different venues directly, with systems of their own choosing, or directly through an API. This has resulted in an increase in the complexity of risk management at all stages of the trading cycle. For large global brokers using multiple trading platforms this is a particular issue: powerful risk-management tools and systems, such as GL Selector and GL Win Supervisor, are available, but they cannot provide the global visibility required to be able to monitor all client orders.

Such a situation makes comprehensive pre-trade risk management very difficult. While mistakes and errors, and even worse rogue trading, can still be identified swiftly – assuming that the right post-trade risk management is operating – it would clearly be beneficial if potential issues could be identified before they occur.

To help resolve this issue and also address the need for closer monitoring of positions and credit limits, SunGard’s global trading business has recently launched its Global Execution Server (GES). This provides brokers with a consolidated picture of all its risk across multiple markets, regardless of the systems that are being used to send the orders to the various exchanges.

The immediate benefits are obvious; but GES also provides additional functionality. Because it is fed with drop copies of all the activity of brokers’ clients on all exchanges, it can be used as a comprehensive disaster recovery solution. Furthermore, as it can connect to other external systems, GES can be used as a single source to send real-time confirmations to back offices, issue tickets and calculate margin requirements and P&L.

GL Delta Selector: Niche but nice

Another new product from SunGard’s global trading business is GL Delta Selector. This is an additional mode of service for GL Selector, the pre-trade risk management and position keeping system, specifically aimed at the trading of futures and options on the same book.

The main advantage of using GL Delta Selector accrues from its ability to consolidate the margin requirements for options and futures position on the same underlying, taken out on the same exchange. Normally these margins have to be calculated separately, meaning that there is no offsetting between a future and an option on the same underlying.

This of course fails to make the most efficient use of margin. GL Delta Selector addresses this by aggregating those futures and options with the same maturity: essentially, it converts the option positions into ‘quasi-futures’ via an algorithm based on their deltas (hedge ratios) and initial margin per lot values, as provided by the listing exchanges. The trading firm can therefore reduce margin requirements and also improve its multi-product and option risk management.

Importantly, Delta Selector is able to integrate working orders with those that have been fully executed, which is essential when a more conservative trading approach is required. Delta Selector provides a far more powerful way of monitoring than can be achieved by standard post-trade models, such as SPAN, working alone.

The demand to mitigate risks across the entire deal chain will not diminish. Trading, while simple in concept, is becoming increasingly complex and vendors have to respond to the frequent changes in the market places they connect to, as well as meeting the specific business process needs of their clients. Pre-trade risk management will continue to present challenges but, with the launch of GES and Delta Selector, SunGard’s global trading business continues to address the issues involved.