VTB Capital, the investment banking business of Moscow based VTB Group, has implemented Quantifi’s OTC analytics, pricing and portfolio valuation solution to support its recently established credit derivatives and hybrids trading desks, and to reduce risk.
The client and supplier started talking early this year after a Quantifi user from another financial institution joined VTB as it built its OTC credit business and started to trade additional asset classes. While Quantifi was on VTB Capital’s radar, the bank scanned other pricing and analytics vendors, and also considered an in-house build, before selecting Quantifi XL to provide access to market validated models and analytics.
Stathis Margonis, head of credit derivatives and hybrids trading at VTB Capital, explains: “We looked to implement a portfolio valuation solution that increased accuracy and flexibility and, at the same time, minimised operational risk. Quantifi’s expertise and ability to deliver a robust tool set for OTC analytics and client pricing were key factors in our decision. Quantifi has already reduced our operational costs and increased our flexibility by allowing us to focus internal development on other strategic projects.”
The decision to use a vendor solution, rather than build in house – VTB Capital had previously supported limited OTC business in house – is echoed by Quantifi CEO Rohan Douglas, who says: “For VTB Capital, the benefits of using Quantifi included time to market and being able to leverage internal resources to focus on more unique projects. A vendor solution is lower cost than an in-house build and it would take years to replicate the industry best practice analytics and reporting that we offer.”
In terms of risk management, Quantifi XL, which is designed for a Microsoft Excel environment, provides pre-trade pricing and tools to structure new OTC credit products, calculate necessary hedges and analyse products to deliver a detailed risk profile.
Quantifi XL was implemented in VTB Capital’s Moscow and London locations before going live after an evaluation period in August 2011.
“VTB Capital has a growing OTC business and is looking to trade new
Asset classes,” says Douglas. “Quantifi supports a variety of OTC products and our goal is to help the bank in as many areas of the OTC sector as possible and expand with it. Everything VTB Capital needs is installed and ready to use.”
Quantifi’s deal with VTB Capital is its first in Russia, but the vendor is already engaged in other emerging markets where clients such as Brazil based BTG Pactual and Malaysia’ CIMB Investment Bank are Quantifi XL users. As well as meeting demand for pricing and analytics from growing OTC derivatives businesses, many of which are filling gaps left by large global banks, Quantifi is working to match demand for more asset class coverage and to meet forthcoming regulation.
Its latest addition, QX.1, released earlier this month and upgrading many of the company’s products, covers OTC foreign exchange products and expands coverage for interest rate products. Noting the changing OTC landscape, Douglas says: “QX.1 incorporates many ground breaking enhancements as our goal is to provide clients with a smooth transition for market changes including counterparty risk management, central clearing, Basel lll, EMIR and Dodd-Frank.”