With any compliance system, you need to be able to control who you trade with, what instruments you can trade and in what currencies, for how much and for what length of time. The Denarius Compliance module handles the following: investment universe currency limits, credit rating, maximum trade duration, bank deposit limit, gross credit lines per counterparty, tenor weights providing a built in cushion against exposure), counterparty and product limits, mark to market limits, trader product and trader portfolio limits.
The Denarius module checks compliance at three levels:
- A basic check is done at the appropriateness of individual trade details for that trader and portfolio.
- More sophisticated market valuation checks are done on the trade taking into account counterparty limits and existing activity with that counterparty.
- The effect of the trade (if completed) on the portfolio is the final check â aspects such as the effect on the portfolio duration, percentage value in credit classes etc.
Speed and pre-trade control are also important factors in Compliance. With Denarius, you can instantly test limits and proper warnings are issued as appropriate. Warnings are sent when the maximum limit is soon to be hit. If a trade hits the limit, authorisation is required. The limits cannot be exceeded unless changed to accommodate this trade. If the limit is passed, an error message is sent to the trader.
Denarius also has two powerful pre-trade functions.
- Traders and fund managers have the capability of running "what if" analysis to see if a trade would break the limit and what would happen in the future if they decided to do certain trades.
- Denarius will suggest counterparties with available limits for a specified trade, so the traders can see whom to call when theyâre ready to trade.
To our fund manager clients, Compliance is one of their most important tools. It lets them see all the exposure information on their different funds provides real-time checks on limits and can provide an audit trail of warnings, breaches, comments and over-rides.