Summit Systems has today announced the release of phase II of its innovative MUST (Multi-Underlying Structured Trade) tool that helps traders easily create, process and analyse complex products and structured trades. Originally announced in May 2003, Summit has since invested considerable R&D resource and partnered with a major Tier 1 bank, to add pioneering functionality that positions MUST as a best of breed tool for both sellside and buyside financial firms.
MUST has been designed to significantly reduce time-to-market for new products. It is a completely flexible and powerful tool that can be fully integrated with Summit’s treasury and capital markets solution. It processes and manages complex structured deals including those whose underlyings span multiple asset classes (e.g., interest rates, FX, and equities) such as power reverse dual currency (PRDC) swaps, multi-callable dual currency range accrual swaps and multi-currency equity best-of performance linked notes. MUST also handles more conventional exotics such as TARNs and ratchet caps - removing the need for custom programming to build trades.
Phase II includes:-
· Completion of front-to-back integration – MUST now offers complete integration from the trading desk through to operations. This provides MUST users with the same workflow, documentation, risk analytics and reporting for all their trades irrespective of complexity or trade type.
· Structuring tool to promote active trading – phase II of MUST includes a structuring tool that promotes the active trading of structured products with a significant reduction in the amount of IT support required. It allows quants to pre-define and create MUST products for trades that can be retrieved and used by traders when needed. Each MUST product has the ability to have its own processing, valuation, accounting, documentation etc. Some of the fields can be defined as flexible e.g. price, maturity etc. The security feature ensures that elements like formula cannot be changed by dealers.
· Intra-trade cash flow netting – for integrated accounting and payments generation.
· Flexibility to choose a pricing model – the Bank can choose to use either Summit’s enhanced BGM model for pricing or its own in-house developed models. When building models the bank is able to define the list of visible model outputs (e.g. Greeks and break-evens) to be displayed at trade level.
· Full security – the Bank can define specific groups of users and their level of access e.g. structurers and quants who design structures and models can have full access to the MUST product builder and valuation APIs, whereas traders have restricted access to product fields. Access can also be defined for risk managers and the back office to read only mode or specific tasks such as settlement and accounts processes.
· Suitability for buy and sell-side applications. For either type of business MUST removes the need to use Excel or custom programming for exotic trades. It enables firms to focus on their core business. Summit’s powerful pricing model, suitable for any kind of instrument, helps both the sellside and buyside independently track the valuation of products and/or portfolios.
Emmanuel Fruchard, director of front office and risk management for Summit states, "Summit has an impressive track-record in the derivatives market. We have exploited the extensive market knowledge gained from partnering with customers to develop a best of breed tool suitable for all buy and sell-side firms. From the largest Tier 1 institution to an independent Hedge Fund firm, MUST speeds-up the time-to-market of any new product. We have focused on developing a tool that integrates seamlessly with all Summit modules and has access to the same functionality as any vanilla trade. All our real-time applications can therefore be applied to any exotic or structured product, for example, real-time market risk, Monte Carlo VaR, real-time P&L decomposition, exceptions and collateral management."
"MUST is a strategic product that we will continue to invest in. Complex derivatives are constantly evolving and are a highly profitable area for banks. What was classed as an exotic a few years ago are now traded constantly and processed as any vanilla. As new structured products are innovated, Summit will keep abreast of these market changes through customer partnerships and MUST will continue to evolve," concluded Mr. Fruchard.