DerivOps New York Photo Gallery

Did you miss DerivOps New York 2014?  Take a peak inside the event in the picture gallery below.

Also, be sure to check out DerivOps North America 2015 for a two-day, in-depth conference on all things derivatives operations. Combining our annual Chicago and New York event as well as our premier collateral management conference, DerivOps North America puts all the information you need to know in one place.  This will be FTF’s biggest derivatives operations conference yet!

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Sheryl Brown Talks Social Media Best Practices

Ash Brokerage’s social media guru Sheryl Brown talks to FTF News editor, Eugene Grygo, about best practices and lessons learned from using social media.

Join FTF for our annual SMAC New York 2015 conference on social media and compliance in the financial services. From social media strategies to compliance issues, this is the premier event for new ideas, stronger systems, and increased connections for banks, asset managers, and insurance firms.

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FTF Rings Nasdaq Opening Bell

Financial Technologies Forum was honored to ring the Nasdaq Opening Bell on September 18, 2014, kicking off our annual FTF SMAC NY event focusing on social media and compliance in financial services. Experience the exciting moments with the FTF team as you view behind the scenes footage from the ceremony here:

View the complete ceremony as FTF rings the Nasdaq Opening Bell here:

FTF will once again be hosting their annual Social Media and Compliance in the Financial Services conference, SMAC New York 2015, on September 17, 2015.  From social media strategies to compliance issues, this is the premier event for new ideas, stronger systems, and increased connections for banks, asset managers, and insurance firms.

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Sue Mayham on How Corporate Actions Has Changed

Our FTF News Chief Editor, Eugene Grygo, recently had the opportunity to sit down with Corporate actions processing veteran Sue Mayham at our recent CAPCon New York conference.  They were able to discuss the changes Sue has seen during her years overseeing corporate actions processing.  Sue also gives us a glimpse into exciting days ahead for the industry.


Did you miss CAPCon New York 2014?  Don’t miss out again and be sure to register for FTF’s SecOps 2015 which is a two-day conference that cover all things securities operations with separate streams covering reconciliations, corporate actions, and buy-side operations, including discussions on industry standards, STP, automation and more. We hope to see you there!

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Kevin McPartland on the G.O.P. Landslide and the Pace of Derivatives Reform

Greenwich Associates’ Kevin McPartland was the chairperson for FTF’s recent DerivOps New York conference.  Our FTF News Chief Editor, Eugene Grygo had the opportunity to sit down with Kevin and discuss the effects of the recent mid-term elections in the U.S. and the state of ongoing derivatives reforms.  Check out the full video intervew below:

FTF is currently planning DerivOps North America which will be held in Chicago, Il on April 21-22, 2015.  Click here to learn more on this two-day, in-depth conference on all things derivatives operations that will combining our annual Chicago and New York event as well as our premier collateral management conference.  DerivOps North America puts all the information you need to know in one place!

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Multiple Prime Utility: the key to transforming the fund manager/prime broker relationship

Sudhanshu (3)Guest Contributor: Sudhanshu Bahadur, Vishal Bakshi and Valcony Sun, Sapient Global Markets

Since the financial crisis, Fund Managers have increasingly moved away from using a single custodian and diversified their risk by splitting the basket under multiple Prime Brokers (PBs). This has provided them with an opportunity to utilize different partners for the different services that they offered, diversifying their asset portfolio mix and market reach.

Fund Managers have now largely switched to this multi-prime business model due to the flexibility it provides and the associated reduction in counterparty exposure it offers. As their investment managers continue to expand into strategies that promise high returns, they look for opportunities that provide access to new securities, geographies, mitigation of risk and competitive pricing.

This model provides the benefits of diversification, access to a wider product range and competitive pricing to Fund Managers. Meanwhile it brings with it a new set of operational challenges for the PBs. These challenges include administration, counterparty risk and monitoring, trade allocation, reconciliation, risk management, portfolio accounting, integration of new fund managers, and reporting.

While the industry’s migration from a single-prime to multi-prime model has benefited Fund Managers, it has also increased complexity in their operations. At the same time, PBs are faced with a much more demanding clientele that can use its diversified base for extracting better financial terms and operational considerations.

An Independent Multi-Prime Utility

In the future, Prime Brokers and Fund Managers will need to create an environment in which they can regain focus on their core competencies. For the fund Managers this means concentrating on generating alpha for their clients, without being burdened by aggregating positions and performing other middle- and back-office functions. On the other hand the PBs will be able to focus on providing value-add services, such as Securities Lending, Margin Financing, Synthetic Lending, Repo Financing, Swaps, etc.

A key element of this environment is a utility that would provide a seamless platform upon which to conduct various business transactions and related operations. It would mitigate the complexity of handling different systems, formats and associated protocols and enable the consolidation of back-office functions that neither PBs nor Fund Managers are well-positioned to perform. An independent utility—hosted either by a collaboration of PBs and Fund Managers, or by a third party—can act as an interface between the PBs and Fund Managers.

This utility will be built upon an independently hosted infrastructure maintained by a third party. It will integrate with multiple PBs and provide a single interface to Fund Managers, enabling simple access to many PBs offering different services and market access. To access a new PB, the Hedge Fund will only need to subscribe to that PB, without having to go through the long onboarding and integration exercise that is required today.

Intermediaries, like Hedge Fund Administrators (HFAs), Third-Party Administrators (TPAs) or even large PBs, might be well suited for the creation of such utilities, which would work on a fee-based model and provide services to both Fund Managers and PBs. This utility could provide a number of benefits, including:

  • Integrating multiple PBs onto a single platform

The utility will integrate with multiple PBs into their custom environment using the PB’s protocols and interfaces, removing the integration burden from the Fund Manager. The complex operational processes currently part of onboarding a new Fund Manager into a Prime Broker, or vice versa, will be undertaken by the utility. When onboarding another PB, the utility will create interfaces to access the transactional, positional and other information from the PB and perform additional analytics on it.

  • Convenient access to multiple Prime Brokers for Fund Managers

The utility model requires one-time integration for the Fund Manager into the utility, after which the Fund Manager will gain access to all the PBs that the utility offers under its umbrella. Both PBs and Fund Managers will be able to avoid the burden of integrating multiple parties—a process that brings no financial benefit to either. PBs will no longer have the burden of integration, while Fund Managers will have a single channel to a broad market of PBs. As this model matures, it will provide Fund Managers ease of portfolio movement from one Prime Broker to another, increasing their accessibility to the market.

  • Independently hosted technology

The multi-prime utility will host its solution on its own infrastructure. The utility will be responsible for maintaining that infrastructure and all operational processes involved, and will have clearly defined SLAs with both PBs and Fund Managers. It will utilize best-of-breed technologies for performing data integration, portfolio accounting, risk management, data management and reporting functions.

  • Consolidated back-office functions across PBs

The utility will perform the back-office functions from PBs and Fund Managers. With the availability of aggregated positions across multiple PBs, the utility will be best positioned to perform risk management, portfolio accounting, reporting, compliance and similar back-office functions. Fund Managers will receive consolidated data and reports, while the PBs will be able to focus on core operations—instead of spending millions on commoditized post-trade services.


The Fund Manager/Prime Broker relationship is continuing to evolve with the changing dynamics of the marketplace. While Fund Managers are looking at diversifying risk and increasing revenue, PBs are focused on improving their service offerings. Meanwhile, both parties are spending considerable resources on integrating with each other and performing back-office functions that neither is well positioned to perform.

Both parties would be better served by investing those dollars to strategically address the new paradigm of a multi-prime marketplace.

A third-party multi-prime utility, offered by a Hedge Fund Administrator, third-party administrator or a large PB, that integrates with multiple PBs and provides single interfaces to Fund Managers, could be the solution to satisfy the evolving requirements of Fund Managers. In the long run, this will improve operational efficiencies, reduce integration expenses and help them regain focus on their core competencies.

Sudhanshu Bahadur leads the technology domain for Sapient Global Markets in Canada, Vishal Bakshi is a Senior Associate of Trading and Risk Management, and Valcony Sun is a Business Consulting Associate, specializing in capital markets, all based in Toronto.



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“What is?” Coding a Compliance Rule Library

Kristi FeinzigGuest Contributor: Kristi Feinzig, Senior Consultant, IMP Consulting

Automated rule libraries have become essential to the trading process, and can have a significant impact on the front office.  Rules that are accurate and precise facilitate a smooth pre-trade and post-trade check, while vague and inaccurate rules can create noise, slow down the trading process, and leave the door open for expensive trading errors.  In recent years, best practices have evolved to improve the quality of the compliance rules library by restricting the ability to write a rule to a few, anointed individuals in an organization.   As regulations have grown more complex, the automated rules have followed suit, and some compliance managers have delegated the task to Technology, leaving it to them to “code” the rules.

Compliance Rule “Coding:” What does it really mean to “code” a compliance rule?  If you have a home-grown system, it may mean that it is written in a SQL-like fashion, and some programming skills are necessary.  If you have a commercial system, however, “coding” the rules is a bit of a misnomer.  It is shorthand for the tasks involved in turning the “plain English” legal definitions in a prospectus, SAI, client agreement, indenture, or regulation, into a logical statement that can be processed by your compliance system.   Most of the market-leading systems have a “plain English” interface that facilitates rule coding by non-programmers.   Why, then, is rule coding so challenging, and why do so many automated rule libraries end up rife with errors spewing “false positives” that slow down the trading process?  The issue is that the commercial interfaces, while helpful, do not alleviate the necessity of crafting precise, logical statements.  In fact, most of the logical thinking about how to translate a compliance mandate should take place before the rules are written. Below is an example of an institutional client mandate:

The fund shall invest a maximum of 5% in the holdings of any single, non-domestic issuer.

  • Shall Invest– Does this rule apply to current holdings or new purchases (or both)?  For example, if an equity holding increases in value, and thus grows to more than 5%, must the fund sell a portion of the holding to bring it back to 5%, or does this rule simply restrict additional investment?
  • A Maximum of 5%— A percentage calculation requires a numerator and a denominator.  Does the rule specify the denominator we should use?  For example, the denominator may be simply the total of all investments or it may also include cash.   For a bond fund, the denominator could be the total net asset value.  For balanced funds, the denominator may be segregated by investment class–i.e. equity only or debt only.  Does the rule specify the numerator—are any securities, asset classes, or issuers excluded from the calculation, such as Treasuries and/or agencies? For structured products and indices, do you look-through to the underlying exposure?
  • In the holdings of any single non-domestic issuer– What counts as a single issuer?  If the security is an equity, do we have the proper parent/child relationships constructed for issuers?  If this is a wholly-owned subsidiary, should we roll the holdings up and count it against the 5% limit on the parent?  How does the rule apply to municipals, i.e. do we have obligors/guarantors identified?
  • Non-domestic issuer:How does the fund define “non-domestic?”  Is it primarily concerned with the country of incorporation, the country in which the firm primarily does business, or perhaps the country of the primary exchange on which the instrument is traded?  Some funds will also exempt certain countries, such as Canada, from the “non-domestic” label.  Some funds or accounts may also be referring to a non-domestic country according to the client, not the investment manager.

Generally, there are specific categories of compliance rules.  Some are easier to code than others.  Exclusion rules simply prohibit something from being traded. Limit rules, like the example given above, can also be straightforward; but keep in mind that there are several ways the source document may read.  Do you want to include or exclude a position that is exactly at 5%?  Do you only want to flag if it is greater than 5% or do you want a warning when it gets close to 5%?  If you are coding compliance rules, you will likely also come across trade rules like no cross trading or restricted brokers.  Finally, you will want to consider what time of day your rule will run.  Is it meant to run in pre-trade, post-trade, in batch compliance at the end of the day?

Clearly defining your compliance rules will help ensure consistency across the organization. It will also ensure that you will know what to expect as the rules are automated, and that the rule “coding” can be done efficiently and consistently.  Lastly, it will ensure that your automated compliance engine will do the job it was intended to do, lowering the risk and improving the efficiency of your trading process.


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