Sophis reports growth in demand for specialist basket swap module

London - 12 May 2010

Four European banks choose Sophis Basket Swap module to enhance risk management and improve operational controls

Sophis, a leading provider of cross-asset, front-to-back portfolio and risk management solutions, today announced that it is seeing significant growth in demand for its Basket Swap module.

Four leading European financial institutions have already chosen the module, which has been specifically developed to support the complex processes that surround basket swap trading as well as improve risk management and operational controls.

Sophis developed its Basket Swap module to support the growing demand for linear equity derivatives instruments by financial institutions. In particular Sophis clients’ Delta One and Securities Finance desks have been driving the development of the module.
Traditionally managed on complex spreadsheets, the day-to-day administration of basket swaps - including basket composition adjustments, swap resets, corporate actions, dividends, interest payments and collateral management - represents a huge overhead in the middle office, while robust risk controls are difficult to ensure. Furthermore existing systems struggle to provide precise intraday P&L. Sophis calculates P&L using both methods: mark-to-market Net Present Value (NPV) and interest accruals, taking into account the correct cost of funding.

The Sophis Basket Swap module is fully integrated into a comprehensive security financing package, providing users with complete flexibility combined with full front-to-back office management. Users can change the basket composition, make basket and spread adjustments, and customise swap schedules quickly and easily. Integrated workflow ensures that all actions are monitored for accurate position keeping and reconciliation of positions between the front and back office.

Samer Ballouk, Head of Product Management and Business Development, Sophis, said: “The multitude of variable conditions involved in trading in basket swaps makes it a complex process, especially when you consider that institutions are sometimes trading billions of euros in one contract. Accurate reconciliation from front to back office is vital to ensure that banks manage risk as tightly as possible. Yet we know that many banks are still managing this process using spreadsheets - in which new conditions are entered manually on a day-to-day basis.

“Our clients who are using the Basket Swap module can be assured that the whole process is managed accurately as well as cost effectively.”

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