SunGard’s Margin Advisor Ready for New Risk-Based Portfolio Margin Requirements

15 March 2007

At the FIA’s 32nd Annual International Futures Industry Conference in Boca Raton, March 14-17, 2007 – SunGard announced that SunGard’s Margin Advisor solution for real-time monitoring of cross-asset margin now meets the requirements of the New York Stock Exchange’s Rule 431 amendments and the Chicago Board of Options Exchange’s Rule 12.4 that will give broker-dealers, futures commission merchants (FCMs) and non-clearing members the ability to adopt a risk-based Portfolio Margin methodology starting April 2.

The introduction of risk-based margining for securities accounts and the expansion of allowable products for risk-based treatment marks a step forward in leveling the field between U.S. equities markets, and global equities and futures markets already using risk-based margin methodologies. This step forward paves the way for combined futures and options margin treatment within the same securities account. The Securities and Exchange Commission and the Chicago Futures Trade Commission are working to explore operational issues and to define the rule changes necessary to support true cross-margining of futures and securities products. SunGard’s Margin Advisor helps support cross-margining of futures and securities asset classes.

A back-office agnostic solution delivered in a Software-as-a-Service (SaaS) or ASP model, Margin Advisor simultaneously computes both Reg T Margin requirements and risk-based margin on a firm’s designated accounts, providing financial institutions with account- and firm-level figures compliant with the new Portfolio Margin rules. Margin Advisor computes both strategy-based margin on non-allowable positions, and risk-based margin on allowable positions, summing and offsetting each to arrive at an account’s portfolio margin requirement for a particular end of day or point in time. Financial institutions require a fully integrated credit monitoring and management solution that goes beyond risk-based haircut calculations to comply with Portfolio Margin rules. Margin Advisor’s strategy and risk-based rule settings and intra-day risk measurement processes deliver warnings and measurements for operations, credit and risk managers to help them manage credit and market risk.

Gerard Murphy, president of SunGard’s brokerage and clearance solutions business, said, “Many financial institutions will want to offer portfolio margin treatment in order to provide greater leverage to their clients. While most margin applications provide purely end of day margin calculations, SunGard’s Margin Advisor offers a broader scale of processing using a rules-based approach to define strategy- and risk-based credit policies, thereby helping give the firm greater comfort and control over credit risk. SunGard’s Margin Advisor is already integrated with SunGard’s Phase3 and GMI solutions, which helps firms benefit from event management and workflow capabilities.”

SunGard’s Margin Advisor portfolio margin features derive risk-based margin computations from theoretical prices on securities, which are hypothetically evaluated to determine worst-case loss scenarios at a specific point in time. The system provides firms with the ability to widen the price intervals beyond exchange minimums, assign higher minimum position values, adjust the volatility assumptions in real-time, and define core equity and requirement variables. The user can accurately view on-screen, the risk offsetting iterations used to produce an account’s portfolio margin requirement. In addition, Margin Advisor provides solid regulatory default minimums, generates warnings when pre-defined limits of exposure are approached or reached, and maintains auditable historical records.

“Although the new Portfolio Margin rules result in higher leveraged margin accounts, the sheer capacity and reliability of the credit monitoring, collection and intervention that SunGard’s Margin Advisor offers will help give financial firms command over their revenue streams,” said Mr. Murphy. “SunGard is committed to providing financial institutions with a sophisticated means of delivering portfolio margin treatment with tools that help to enhance the firm’s competitive advantage.”

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