>Middle office for complex derivative products

Middle office for complex derivative products

In order to meet the dual challenges of constantly evolving management strategies and increasingly complex derivatives, SGSS offers an independent middle office solution encompassing all OTC instruments and structured products.

This solution fully addresses the expectations of all financial market players – asset managers, institutional investors and trading desks – meeting their entire technical and operational middle office requirements for OTC derivatives and structured products.

Specifically, SGSS middle office offering includes the recording and the administrative processing of transactions performed by traders as well as the management of positions for all derivatives. These services are provided using an asset servicing technology platform developed by SGSS and are an essential component of our comprehensive offering of solutions dedicated to complex derivatives.

The current proliferation of financial instruments, their growing complexity as well as the involvement of numerous participants in the value chain (managers, prime brokers, counterparties, custodial service providers, etc.) result in onerous processing costs requiring considerable investments in both human resources and systems.

A middle office services offering for complex derivatives gives financial market players access to an outsourcing solution ensuring operational support, under the best possible conditions, for all functions required in the processing of OTC instruments and structured products.

Technical and functional expertise:

Our middle office solution covers all post-trade functions, which mainly include:

trade support:

  • post-trade analytics;
  • management of confirmations;
  • monitoring of events during the trade life cycle (reset reports, netting, interest and premium payments, financial periods);
  • management of positions (calculations, P and L, reconciliation between the positions of the manager/prime broker team and the middle office/ pricing team).

compliance:

  • post-trade monitoring;
  • monitoring of counterparty risk limits;
  • master agreement compliance;

Collateral management:

  • verification of the credit support annex;
  • daily P and L on the entire portfolio;
  • reconciliation of positions with counterparties;
  • margin call management;
  • collateral management monitoring.

Customised client reporting system

SGSS offers a set of standard reporting formats including those relating to middle office, risk and payment systems. Specific reporting formats may also be tailored to meet the specific needs of clients.

Scope of the solution

Our middle office solution covers all complex derivative instruments: interest rate swaps, FRAs, caps, floors, credit default swaps, CDOs, CFDs, total return swaps, etc. It is designed to meet the challenges faced by either traditional asset management firms or hedge fund and alternative investment specialists whose portfolios consist largely of OTC derivatives and structured products.

The outstanding features of our service offer

Our middle office solution for complex derivatives is unique in that it adapts to the specific needs of each client. The scope of services offered is agreed with the client prior to the implementation of the solution. For example, it may include the handling of payments involving a power of attorney (POA). Our solution also provides the benefit of the additional capabilities offered by our technology platform, including an automatic interface with DTCC (provider of clearance services for credit derivatives) or the development of STP flows with the custodian and/ or the pricing agent. The organisational principles underlying SGSS solution give it the transparency required by the regulatory authorities. Rigorous procedures for the verification of results are applied, all of which are constantly monitored and compared with the latest technological and methodological innovations in the sector so as to better serve our clients.

A total, flexible and scalable solution

The technology backbone of our middle office solution is our powerful, function-based asset servicing platform covering all currently available OTC derivatives and structured products. It is built on a widely acclaimed software suite, which has been specifically adapted to suit the needs of our Asset Servicing offering. This platform also makes use of a powerful EAI product, WebMethods, to facilitate exchanges with all participants in the value chain (clients, prime brokers, managers, counterparties, etc.). Finally, the acquisition costs for the selected technology solutions as well as the implementation of the various interfaces have all been covered by SGSS and then shared among the large number of clients benefiting from our middle office solution.

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