FRTB and the Upcoming Renaissance in Market Risk Management, Part 3: Evaluating Ecosystem Solutions

by Cubillas Ding,  Dennis Kong, January 23, 2017
Global

Abstract

In the years ahead, we expect that the market risk IT foundations and business capabilities built in the course of addressing and complying with the Fundamental Review of the Trading Book (FRTB) will set the stage for next-generation capabilities for market risk management.

Celent has released a new report titled FRTB and the Upcoming Renaissance in Market Risk Management, Part 3: Evaluating Ecosystem Solutions. The report was written by Cubillas Ding, a Research Director with Celent’s Securities & Investments practice.

If executed correctly, these capabilities could herald a new architectural renaissance that features business and functional capabilities built on sound data and analytical supply chains, “front-to-back-aligned” information delivery, and shareable service and process components. These operational capabilities will give banks a differentiator in determining the degree of capital impact under the coming FRTB capital regime.

The market risk and FRTB solutions market continues to evolve as vendors enhance and launch new functionality to help financial firms operate effectively under the new upcoming regime. Beyond each vendor's traditional core competence and pedigree, we see vendor solutions falling into (occasionally spanning) several categories: Ecosystem Component Specialists, Risk Systems Providers, and Front-to-Risk Platforms.

“In forward-looking banks, the longer-term objectives and payoffs entail more than merely achieving efficiency gains, but also improving the way the bank manages risk by rethinking how the front office, risk, and finance functions embrace emerging innovations,” says Ding.

“FRTB solutions are wide-ranging in terms of functional scope and underlying IT capabilities, with a rapidly changing state ranging from brochure-ware, to proof-of-concept-ware, right to firms that have already released commercially available software. Our advice is, know thyself and know what you need,” he adds.

In this third instalment, Celent evaluates the vendors and solution offerings that address the ecosystem of requirements using Celent’s ABCD framework. This report is intended as an industry resource for firms when designing, evaluating, or making decisions on FRTB and next-generation market risk solutions.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents

Executive Summary

1

Introduction

3

FRTB: Impact of the New Market Risk Imperative

4

 

Overhaul of Trading Book Capital

4

 

Implications for Existing Functions and IT Ecosystems

5

Vendor Overviews

8

 

Solution Positioning and Vendor Groupings

9

 

Comparison of Functional Coverage

10

Vendor Ranking

15

 

At a Glance

17

 

Advanced Technology and Features

18

 

Breadth of Coverage and Functionality

19

 

Client Base / Market Presence

19

 

Depth of Services

20

Vendor Profiles, Strengths, and Weaknesses

22

 

Asset Control

22

 

Calypso

25

 

FIS

29

 

GoldenSource

33

 

IBM

36

 

Markit Analytics

40

 

Misys

45

 

Moody’s Analytics

50

 

Murex

53

 

Numerix

56

 

Quantifi

60

 

SAS

65

 

TMX Razor

69

 

Wolters Kluwer

73

 

Xenomorph

76

Looking Forward

80

Appendices

81

 

Appendix A: Evaluation Criteria

81

 

Appendix B: Solution Platforms and Technology

82

 

Appendix C: Solution Licensing and Pricing Structures

85

 

Appendix D: Details on Ecosystem of FRTB Components and Activities

88

Leveraging Celent’s Expertise

90

 

Support for Financial Institutions

90

 

Support for Vendors

90

Related Celent Research

91

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