Supporting OTC Derivatives Workshop 3
The Effect of OTC Derivatives on System Infrastructures
| Date: | March 2007 |
| Author: | Sarah-Jane Dennis |
| Price: | £250 to non-members of the Investit Intelligence Member service |
This research report outlines the discussion material and key conclusions from the third of three workshops on supporting OTCs in investment management companies, organised as part of the Autumn 2006 Investit Intelligence service.
The third workshop addressed the effect of OTCs on investment management system infrastructures and was held on Tuesday 06 February 2007.
The workshop examined straight through processing (STP) at buy-side firms and how system infrastructures facilitate this. This section also compares workshop delegates' STP rates across both conventional and OTC derivative instruments. We also discussed the impact of OTCs on conventional STP models across acquiring, monitoring and valuing assets.
The report outlines four case studies of investment managers' different approaches when changing their system infrastructures to support OTCs and looks at a snapshot of the different systems available to support OTCs in the middle and back offices.
Table of contents
| Management Summary | 1 | ||
| 1.0 | Introduction | 3 | |
| 1.1 | Scope and framework of the research | 3 | |
| 1.2 | Workshop objectives | 4 | |
| 2.0 | STP in the Buy-side | 5 | |
| 2.1 | The historic goal of STP | 5 | |
| 2.2 | The two pillars of STP: systems and interfaces | 5 | |
| 2.3 | Why STP? | 6 | |
| 2.4 | The essential components of STP | 6 | |
| 2.5 | STP rates for conventional assets and listed derivatives | 7 | |
| 2.6 | STP rates for OTC derivatives | 9 | |
| 3.0 | The Effect of OTC Derivatives on STP | 11 | |
| 3.1 | Acquisition | 11 | |
| 3.2 | Monitoring | 12 | |
| 3.3 | Valuation | 14 | |
| 3.4 | Summary | 15 | |
| 4.0 | Case Studies | 17 | |
| 4.1 | Case study 1 - the data-centric model | 18 | |
| 4.2 | Case study 2 - the volume-centric view | 19 | |
| 4.3 | Case study 3 - the integrated front-end approach | 20 | |
| 4.4 | Case study 4 - the money-no-object approach | 21 | |
| 4.5 | Summary | 22 | |
| 5.0 | Systems | 23 | |
| 5.1 | Systems for the front and middle offices | 23 | |
| 5.2 | Systems for the back office | 24 | |
| 5.3 | Future trends of OTC derivative systems | 25 | |
| 6.0 | Conclusions | 27 | |
| 7.0 | Recommendations | 29 | |
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