Technology integration solution vendor Formicary has released the latest version of its price verification solution, RiskSeer, with a view to improving its offering for the back office as well as those users in the front office. The vendor has traditionally pitched its solution at consumers of market data focused on pricing in the front office but regulatory change and market dynamics have meant that pricing data is equally as important to the back office, explains Alexander Millington, director of Formicary’s Trading and Risk Technology Group.
The new version of RiskSeer therefore aims to pull together market and trade data to provide an accurate independent pricing verification platform on which to base risk decisions, says Millington. Derek Flanagan, business development manager at the vendor, adds: “RiskSeer is able to automate a firm’s price validation processes and has been around for four years in the market. This latest upgrade is a response to client requests and includes a number of front end improvements to the GUI for users in the back office.”
The vendor is also not a new entrant to the trading and risk management solution community; it has been around since 2000 and has focused on systems integration of solutions such as those offered by Calypso, Murex and Misys’ Summit range. The RiskSeer offering in particular has been around for four years but has thus far not netted a huge number of clients for the vendor: three clients are currently using version one of the solution. Hence the vendor is keen to improve its competitive offering to reach a larger audience.
The full list of new capabilities in the latest version of the solution includes: extended securities coverage; position valuation calculation and tolerance checks; rules-based price averaging from multiple raw data sources; the ability to integrate custom pricing models; and extended market data feed handling for Reuters, Bloomberg and Markit.
The solution claims to centralise market and trade data related to pricing to facilitate accurate and timely decision making by the risk, product control and finance units of financial institutions. It automatically pulls together data from multiple price sources and is able to feed multiple price destinations into one, consolidated view, which can be organised by any available data attribute, such as instrument type, currency, index, or counterparty.
This is some way beyond the vendor’s first efforts at providing pricing verification solely to those sitting on firms’ front office trading desks and is a response to the growing interest in pricing and valuations data across the business due to regulatory and client pressure. The vendor’s pitch is aimed at those looking to reduce costs in a climate of recessionary caution around IT spend. The need for a means of consolidating pricing, valuation and risk data is a growing priority for organisations, says Millington.
The upgrade for the solution has been in development over the last year, adds Flanagan, and it has opened up a new market for the vendor in terms of increasing its relevance for those outside the front office. The finance departments of firms have indicated particular interest over the last six months, he explains, and they have extra requirements but the core process is still the same as for those sitting in the front office.
“These back office users have not gone through the same investment process as the front office in terms of technology integration and manual intervention is therefore much higher in the back office. Simple data checking is a long process for them and therefore they are much more open to centralising these fragmented data environments now, as regulatory scrutiny increases in this are,” he explains.
Millington adds: “At the end of the day, both sets of users have a common goal: front office risk managers need to provide audited prices and the back office needs to understand where these valuations have come from.”
In terms of direct competition in the market in this space, Millington reckons the biggest threat is from in-house development. However, he notes that this is a route that many are being discouraged from pursuing due to falling headcounts and an increased focus on costs around internal development. “The main focus of RiskSeer is on integration and I don’t see any other vendors directly in competition with us. We have a lot of experience in working with clients to integrate their solutions fully in terms of pricing applications’ formatting,” he elaborates.
Millington reckons that in-house examples of these systems often don’t always show the full picture: “RiskSeer is different in that it brings together data from multiple price sources to multiple price destinations, working alongside existing trading and market data applications to create a transparent, integrated workspace that eases every aspect of the valuation and risk process.”
The solution sits off of the vendor’s integration framework, Formicary Connect, and provides broader integration capabilities with clients’ applications. On a basic level, the application enables authorised users to access, manipulate and quality check trade and pricing data and export the information on demand. Product controllers, risk and finance personnel can all request the market value of positions from an individual asset, book, regional or global perspective at any given time. It deploys a rules-based workflow to automate the distribution of this pricing data aimed at ensuring clear and accurate reporting within a bank’s approved audit process. Full built-in exception handling ensures any market data discrepancies are identified to the user as soon as they occur, claims Millington.
In terms of its current clients, WestLB has been using the solution for four years across its global operations and will be migrating to the latest version of RiskSeer along with the vendor’s other two clients over the next 12 months. The challenges in this migration process will be around reintegrating systems that the banks have introduced since the rollout, explains Millington.
New clients, however, will see a much more aggressive rollout of the solution in comparison to what they could achieve in-house, claims Flanagan. “The lead time for version two of the solution has been reduced significantly so that we can hook up to a firms’ trading and risk systems in a period of two to three months for each asset class,” he says.
The vendor is hoping to capitalise on the current industry focus on valuations data, but it will have to be quick off the mark of it is to succeed. The space has many solution vendors in the running, albeit with a slightly different pitch from Formicary. The vendor may have relied on word of mouth up until now, but will likely need to be more aggressive in its approach in the future if it hopes to gain significant traction.