Harnessing the Network of Banking Intelligence
Misys Treasury & Capital Markets
Streamlining Treasury & Capital Markets operations for competitive advantage
Vincent Kilcoyne MSc. PhDMisys Treasury Operations Expert
Head of Business SolutionsEMEA
Harnessing the Network of Banking Intelligence
Agenda
• Challenges facing Treasuries
• Sample Treasury Architecture
• Misys Approach
• OpicsPlus Overview
• Questions ?
Harnessing the Network of Banking Intelligence
• Business Drivers– Workflow and Operational Efficiency– Commoditisation of Treasury Products– Regulation
• Technology Drivers– Componentisation– Web Enablement– Outsourcing and ASP Services
Key Market Drivers
Harnessing the Network of Banking Intelligence
• Workflow and Operational Efficiency– Automation top priority– Reverse trend in Headcount growth– Banks focus on headcount in proportion to returns– Highly skilled individuals not wasting time on menial tasks– Reduce Error Rates– Reduce Transaction costs
Business Drivers
Harnessing the Network of Banking Intelligence
Market Evolution
0%10%20%30%40%50%60%70%80%90%
100%
1991 1996 2001 2006
Physical Settlement
Settle Electronically With Intervention
Settle Electronically
Back-office operations –from labour-intensive to “systems intensive”
Harnessing the Network of Banking Intelligence
Cost per TradeYear on Year Trends
• For FX, the Cost per Trade has steadily decreased over the last 5 years despite some fluctuation in average volumes. In 2004, CLS completed its first full year of processing and this has further contributed to the ability of banks to 'scale up' their processing without a measurable increase in headcount.
• For Currency Options, the Cost per Trade remained relatively static in 2004 despite another significant increase in average trade volume, part of this was due to the increase in the volume of corporate & exotic trades.
• The Cost per Trade for Money Markets continues to reduce, indicating that technology improvements have been made in a previously "unfashionable" area.
Year on Year - Operations Cost per Trade & Volume Trends
$ 0
$ 2
$ 4
$ 6
$ 8
2000 2001 2002 2003 2004
Cos
t pe
r Tra
de
0
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Avg. Cost per Trade Avg. Volume
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0
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$ 0
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Ann
ual T
rade
Vol
ume
Foreign Exchange Money MarketsCurrency Options
Harnessing the Network of Banking Intelligence
Cost per TradeYear on Year Trends
• For Interest rate Derivatives, static volumes and the rise in the Cost per Head have contributed to a rise in the Cost per Trade
• For Credit and Equity Derivatives, a rise in volume together with increased usage of industry utilities and better technology has driven a rise in Operational Throughput and thus a reduction in the Cost per Trade.
Year-On-Year Change in Operations Cost per Trade
$0
$50
$100
$150
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$250
$300
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$450
2003 2004 2003 2004 2003 2004
IR Derivatives Credit Derivatives Equity Derivatives
0
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Cost per Trade Average Trade Volume
Harnessing the Network of Banking Intelligence
Can you afford to ignore thisthis ?
= 25%
Operational Risk –
Harnessing the Network of Banking Intelligence
• Commoditisation of Treasury Products– Increased complexity and broader coverage of asset classes
• Treasuries demand improved ease of access• Banks and clients keen to deal in more complex instruments
– Increased interest in Riskier markets and Financial Instruments• Declining margins in traditional FX and MM• Increased trading in Higher Return markets• Banks must have appropriate infrastructure and risk management processes
– Improved client service and delivery models• Banks are forced to differentiane on service, and breadth of offering
Business Drivers
Harnessing the Network of Banking Intelligence
• Regulation– IAS39/FAS133
• Not all organisations are fully compliant• Lack of integration causes:
» Increased operational risk» Inconsistencies between models will cause errors in accounting systems
– Sarbanes-Oxley• Strict requirements on PLC’s regarding disclosure and transparency• Many treasuries will be forced to adapt/change existing treasury solutions to support Sarbox
requirements.
– BASLE II—Deadline 2007• Implications
– Banks must put more comprehensive systems in place for calculation of risk exposure– Treasury is a contributor to the overall risk position of the bank– Inadequate processes in Treasury (operational Risk) could increas exposure
Business Drivers
Harnessing the Network of Banking Intelligence
• Componentization– Banks traditionally see packaged solutions as not meeting their specific needs in terms of
• Scalability• Functionality
– New development platforms such as J2EE and .NET drive the trend towards open architecture• Allows easier customisation• Cleaner Customisation• Easier Integration• Packaged solutions using these approaches are seen as more viable
– Banks see flexibility as a priority for long-term treasury systems strategy
Technology Drivers
Harnessing the Network of Banking Intelligence
• Web Enablement– Internet and Thin-client result in cheaper way of distributing access to core systems for
• Internal Staff– Result in increasing centralisation– Greater control and monitoring
• Corporate clients for ”Self-Service”– Reduction in error rates and transaction costs
• Outsourcing and ASP Services– Primarily targeted at Regional Banks and Buy-Side (Hedge Funds, corporates etc.) – Not really practical for large banks as they see core treasury as part of their expertise.
• Mainly provided by large institutions e.g. ABNAmro, JPMC using either Vendor applications or in-house
Technology Drivers
Harnessing the Network of Banking Intelligence
• Challenges facing Treasuries
• Sample Treasury Architecture
• Misys Approach
• OpicsPlus Overview
• Questions ?
Harnessing the Network of Banking Intelligence
IT – critical enabler to achieve STP ?The current systems architecture landscape:
Forex Money Markets Fixed Income Equities
•Product coverage Product coverage by business areaby business area
– Forex Spot & Fwd.– Swap & Time Deposit– Repo– OTC Derivatives
– Bond– Repo– OTC and exchange-
traded derivatives
– Equity (Brokerage)– Equity derivatives
– Foreign bonds issuance
Harnessing the Network of Banking Intelligence
What is the result of this disparity
• Integration Complexity– High degree of effort, initial and maintenance
• Approximately 60% of the implemetation effort is spent on Integration
• Deployment • Uniformity of treatment
– Are we suffering from ”Internal Argitrage” or ”Model Risk”• Workflow
– Where is my transaction ?– Do I have a clear control or understanding of the Workflow– How many systems do my staff need to learn– Can my Back office system(s) support the same products as my Front Office
system(s)• What happens if the answer is no ?• Are we relying on Excel and Access
Harnessing the Network of Banking Intelligence
• Challenges facing Treasuries
• Sample Treasury Architecture
• Misys Approach
• OpicsPlus Overview
• Questions ?
Misys Banking Systems
Harnessing the Network of Banking Intelligence
• Misys’s Financial Markets Solutions –A holistic view of your financial markets operations based on our E-STP concept
Misys Banking Systems
Harnessing the Network of Banking Intelligence
BUT !
A Solution is more than product !!!
Harnessing the Network of Banking Intelligence
What Solution means to us !
– Functionality that has evolved through extensive use in multiple segments and locations.
– Confidence that our products will stay in tune with new trends
– Technical
– Functional
– Best Practice Implementations.• Bringing true life implementation experience to you
» Decreased Implementation times
» Industry proven approaches
Harnessing the Network of Banking Intelligence
An Important Question
STP:
Process
or
Philosophy ?
Harnessing the Network of Banking Intelligence
What are your real STP rates
Description Single Occurance
Replication/Enrichment
STP Rate
Transaction Yes No 90%
Client Details Yes Yes 85%
Yield Curves No Yes 80%
Rates/Prices No Yes 75%
Settlement Instructions
Yes Yes 70%
Others Yes Yes ?%
Harnessing the Network of Banking Intelligence
Is STP simply a term used to reflect the flow and management of transactions ?
In reality, it is much more !!
Harnessing the Network of Banking Intelligence
• Challenges facing Treasuries
• Sample Treasury Architecture
• Misys Approach
• OpicsPlus Overview
• Questions ?
Misys Banking Systems
Harnessing the Network of Banking Intelligence
OPICSPlusOPICSPlusOPICSPlusOPICSPlusAccountingAccounting
ManagementManagementAccountingAccounting
ManagementManagement
SubSubLedgerLedger
SubSubLedgerLedger
AccountingAccountingAccountingAccounting
Risk MgmtRisk MgmtRisk MgmtRisk Mgmt
Liquidity MgmtLiquidity MgmtLiquidity MgmtLiquidity Mgmt
Performance MgmtPerformance MgmtPerformance MgmtPerformance Mgmt
Limits &Limits &Compliance MgmtCompliance Mgmt
Limits &Limits &Compliance MgmtCompliance Mgmt
Middle OfficeMiddle OfficeMiddle OfficeMiddle Office
Decision SupportDecision SupportDecision SupportDecision Support
PortfolioPortfolioManagementManagement
PortfolioPortfolioManagementManagement
Order MgmtOrder MgmtOrder MgmtOrder Mgmt
TradingTradingTradingTrading
Front OfficeFront OfficeFront OfficeFront Office
Cash MgmtCash MgmtCash MgmtCash Mgmt
Custody MgmtCustody MgmtCustody MgmtCustody Mgmt
Clearing andClearing andSettlementSettlement
Clearing andClearing andSettlementSettlement
Back OfficeBack OfficeBack OfficeBack Office
Market InfoMarket InfoMarket InfoMarket Info Clear & Settle Clear & Settle LinkLink
Clear & Settle Clear & Settle LinkLink
General General LedgersLedgersGeneral General LedgersLedgers
ExternaExternal Linksl Links
ExternaExternal Linksl Links
Work StationWork StationWork StationWork Station Internet Internet ClientClient
Internet Internet ClientClient
1st Qtr1st Qtr2nd Qtr2nd Qtr002020404060608080
1st Qtr1st Qtr2nd Qtr2nd Qtr
eOpicseOpicseOpicseOpicsUserUser
InterfacesInterfaces
Product Overview
Harnessing the Network of Banking Intelligence
Summary
•A treasury solution designed by practitioners
•Extensive Customer Base. Approximately 250 sites
•Providing full automation for transaction lifecycle, trading activities and workflow control
•Enabling institutions to streamline their treasury business through efficient workflows
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