20 May 2018

Buy-side still reliant on manual process for complex derivatives - report

26 August 2015  |  5132 views  |  0 Stock exchange numbers

Almost half of asset managers are still reliant on costly manual processes to manage complex derivatives creating a dangerous level of operational risk according to a report from buy-side systems vendor SimCorp.

International regulators have targetted complex derivatives in their efforts to reduce systemic risk and have introduced central clearing for swaps trading in order to encourage greater use of electronic trading for broker dealers and major buy-side firms.
But the SimCorp research, which canvassed more than 50 North American asset managers, shows that this drive is not working its way down to other market participants with 44% using either completely or heavily manual processes for their swaps transactions. Additionally 55% of managers are unable to get a consolidated view or 'look-through' of their swaps portfolios.
This 'look-through' is considered essential for managing swaps as it enables firms to track the positions of these derivatives in relation to other asset classes and to monitor overall strategy. Together with the lack of automation, the practices highlighted in the survey could result in delayed views of exposures, costly errors and longer times to market, says Geoff Cole, director of consultant Sapient Global Markets.

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