Securities finance industry to increase spend on trading and risk management technology according to survey by Sophis

2 February 2009

Research conducted by Sophis, a leading provider of cross-asset, front-to-back risk and portfolio management solutions, has revealed that the securities finance industry expects to increase spending on trade and risk management technology over the next 12 months. The Sophis study surveyed 100 professionals at the recent Lepus seminar in London, The impact of current market volatility on the securities and finance market. Other key findings include:

• 69% of respondents said that their trading and risk management requirements have changed as a result of current market volatility.

• 63% said their firms have increased spending on trading and risk management technology over the past 12 months.

• 57% expect to increase spending over the next 12 months.

The panel of speakers at the Lepus seminar outlined the impact of the current market volatility on the securities finance market. They said the ability to monetise collateral is now much harder, and there is more focus on the potential liquidation costs of the collateral pool. This has direct implications on trading and risk systems. Existing trading models need to be modified as the original assumptions no longer apply in the current market environment. Furthermore, risk systems need to be updated so that they can cope with the increase in trading volume and speed.

Olav Bridié, head of sales for investment banking in the UK, Ireland, Nordics and South Africa, comments: “There has been a move away from standard lending and investment frameworks in the securities finance market, and industry players must have systems that are flexible and can quickly adapt to the changing market. The results of the survey show that investment banks and prime brokers are aware of the need to invest more to improve trade and risk management systems in order to more efficiently manage risk and cope with the growth in trading volume and speed.”

Sophis’ provides a comprehensive module for Delta One and linear derivatives trading activities, including securities finance, leveraged exposure, index arbitrage and market making (ETF). Sophis RISQUE supports these activities with complete coverage for all the relevant instruments, static and market data and comprehensive functionality for trade capture, cash flow management, risk management and P&L. Sophis is committed to the speedy implementation of the module, which is supported by a highly qualified R&D department to rapidly meet the changing needs of a demanding client base in a constantly evolving market.

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