Client: A tier 1 investment bank

The client is a major player in the prime brokerage and synthetic finance market, offering clients a range of synthetic equity products including single equity swaps, portfolio swaps and total return swaps. The systems and processes used to support synthetic equity products were fragmented, especially for portfolio swaps, and they were not properly integrated with the strategic equity derivatives infrastructure.

The systems and processes used to support synthetic equity products were fragmented, especially for portfolio swaps, and they were not properly integrated with the strategic equity derivatives infrastructure. The key objectives of the bank’s global synthetic equity business unit included:

  • Intra-day risk, real-time risk and P&Ls for synthetic equity and hedge trading
  • Integration into the risk systems and infrastructure used for key equity derivatives
  • Increased flexibility to extend the range of synthetic products offered, including the ability to hedge flexibly and efficiently
  • Ability to offer rich client swap servicing and cash management across the synthetic equity product spectrum

We were engaged by the client for a three-month project with the aim of designing a portfolio swap technology solution, focussing on:

  • providing real-time risk management for portfolio swaps
  • enabling more flexible hedging of synthetic equity trades and risk, also helping to improve profitability and efficiency
  • reducing operational complexity and risk
  • allowing for a broader product range to meet client demand

Thanks to our process modelling capabilities and a strong track record in the field of synthetic finance, we were in an ideal position to safeguard the business, deliver the required operating model and design a logical application architecture.

Our specialists successfully delivered:

  • a target logical architecture and a target information architecture
  • a target operating model including a functional model, a process-activity-task model and the processing of swim lane template
  • a synthetic equity business requirements document

After being awarded the project and completing the related tasks, there was significant client interest in our RAV PAT modelling approach and technology. This is currently being pursued independently under a software license and consulting proposal, with a view to extending solutions.

We also produced generic process and functional skeleton models and these can now be used in sales and quick-start projects.