Sell-Side Technology Awards 2014: Best Sell-Side Market Risk Product — OpenGamma

The platform, known among its creators as OGP4M, began as a quest to improve an inexact science—derivatives dealers and futures commission merchants (FCMs) frequently overfund their margin accounts by up to 15 to 20 percent in case of a severe margin call or adverse market event. To help fine-tune this necessary, but usually bloated, buffer cost, the young London-based provider sought to develop a light add-on tool for its broader, open-architecture market risk offering.

OpenGamma didn’t expect, however, that an early and significant influence on the platform would be neither a dealer nor FCM user, but rather one of the major central counterparty (CCP) clearinghouses, which had installed its core market risk analytics separately. The unique relationship produced knowledge of ever-changing margin methodologies that is notoriously difficult to build up, so OpenGamma learned its lesson—and doubled down with yet another CCP. As a result, swap execution facilities (SEFs) and the pre-trade credit check hubs mandated by Dodd–Frank have joined sell-side institutions—and an increasing number of buy-side firms—using the platform as well. Seemingly overnight, the platform became the industry standard, stemming from what OpenGamma values above all: flexibility.

With scenario analysis that is calculated in real time or end-of-day depending on need, the tool computes initial margin (IM) and variation margin (VM) for everything from standard fixed to floating-rate swaps and zero-coupon swaps, to single and double-ended stubs, compounded, variable notional, and forward-rate agreement (FRA) contracts. Already covering methodologies used by the CME Group and LCH.Clearnet, OpenGamma is currently working on the details for the IntercontinentalExchange (ICE), Eurex, and the Singapore Exchange (SGX), and can support hybrid futurized products as well.

While it is certainly possible to imagine an effective market risk platform without a margin component, OpenGamma’s win demonstrates that the best among them must be capable of integrating both—coping with ecosystems like cleared swaps that have become far more complex and potentially expensive, without breaking the bank on an onerous IT reconfiguration. OpenGamma’s Platform for Margining has struck that balance, even if the way the vendor arrived there wasn’t in its original plan. But its diverse set of clients wouldn’t complain about that.

While it is certainly possible to imagine an effective market risk platform without a margin component, OpenGamma’s win demonstrates that the best among them must be capable of integrating both—coping with ecosystems like cleared swaps that have become far more complex and potentially expensive, without breaking the bank on an onerous IT reconfiguration.