The implementation forms part of MTBJ's initiative to provide high quality sophisticated products, which will enable the bank to achieve its goal of becoming the leading global custodian bank, while also providing the highest standard asset management services.
Pension funds are increasingly investing in derivative products such as interest rate swaps. In addition, the products available for making investment decisions in the investment advisory industry will expand after the new Securities Exchange Act is enforced this year. Under the current investment advisory law, derivative trades are limited to negotiable securities only, but under the new act this will include credit derivatives. Therefore, MTBJ expects to see further increases in the need for OTC derivative trades such as credit derivatives, interest rate swaps, etc, resulting in the need for supporting technology.
In order to comply with the new environment and rapidly evolving market, MTBJ will completely systemise all of its asset management operations relating to derivatives, allowing for high volume processing of derivative transactions. Calypso is an integrated cross-asset software system designed for trading, risk management and processing, combined with high flexibility and extensibility. Specific enhancements have been made to the system to support the Japanese market.
MTBJ will utilise the back-office functions of Calypso's derivatives solution for asset management. By implementing Calypso, the cash flow calculation, schedule management, and market valuation associated with trading OTC derivative products will be possible. Efficient processing and detailed management of high volume derivative transactions, which historically have been difficult to handle, will now be simplified.
In the initial period of the operation, target products are limited to domestic and international interest rate swaps, currency swaps, domestic credit default swaps, total return swaps, swaption, cap and floor with the possibility of expanding coverage in the future.