April 28, 2009
Cinnober

Cinnober launches real-time clearing and risk management solution

Addresses key exchange and clearing house issues in the post credit crisis trading landscape

Building on its experience in delivering post-trade solutions with clearing related functionality to customers including NYSE Liffe, the London Metal Exchange, Quadriserv and Nord Pool, Cinnober is now launching a comprehensive clearing and risk management solution, TRADExpress RealTime Clearing.

Addressing the industry’s new challenges

The new offering seeks to address major issues in the exchange and clearing house sector.

First the credit crisis has sparked ongoing debate about the need for new regulatory measures. It is becoming clear that an integral part of the response will be a requirement for enhanced and flexible clearing and risk management technology.

Then, there is the ever increasing influence of high velocity, high frequency algorithmic trading. Such speed and sophistication, however, brings with it increased risk and a new level of demand for high performance, real-time clearing and risk management solutions.

The new service also responds to increasing competition in the market for the provision of clearing services. New entrants and current providers alike will need to respond quickly and flexibly in order to develop their business and launch new services of their own.  

TRADExpress RealTime Clearing addresses these new challenges and is geared up for delivery during 2009. The system targets established and emerging clearing organizations and exchanges. It covers a range of services for the clearing organization as well as for its members to make post-trade management an efficient and secure process – from trade execution to settlement.

Trading platform performance applied to the clearing process

A key strength in Cinnober’s new offering is the ability to calculate risk and margin in real-time, pre-trade if desired, so that a continuous up-to-the-second picture of a member’s positions can be seen at any given moment. Inbuilt flexibility allows providers of clearing services to swiftly extend their offering with additional products; cash or derivatives, OTC or listed, of any asset class without further development work. It can utilize any leading risk related algorithms and uses standard protocols, such as FIX and SWIFT, to facilitate cost-effective integration.

The demands on trading platforms have increased significantly in recent years driven by accelerating competition. Speed, high throughput, sophisticated functionality, future proof technology and cost effectiveness have become vital factors for marketplaces. The same factors are expected to be critical for the clearing segment in the post-credit crisis trading landscape.

“The success of the clearing houses in managing market risks during the credit crisis has resulted in politicians and regulators calling for clearing to be extended into a wider range of markets. As regulators place more emphasis on risk management and clearing there will be exciting business development opportunities for organizations with systems capable of fast, efficient risk management and the flexibility to clear a wide range of instruments,”, says Nils-Robert Persson, Executive Chairman of Cinnober. “Many of the systems running today will have a hard time coping with the demands of the markets and regulators resulting from the financial crisis and with increased competition. We believe that the demands on clearing and risk management technology will be as stringent as they are on the electronic trading platforms that we already deliver”. 

Built on innovative but proven technology

TRADExpress RealTime Clearing is built on the TRADExpress platform which runs with market leading low latency in several high transaction marketplaces. The solution offers a high degree of flexibility and scalability for future business development. 

Many of Cinnober’s implementations have included clearing-related components, such as the technology supporting NYSE Liffe’s award-winning Bclear service. This enables OTC transactions to be confirmed and cleared in the same way as exchange contracts. The applications have also covered a wide variety of cash and derivative instruments in the commodities, securities lending, energy, and securities markets. 

“With the launch of TRADExpress RealTime Clearing we are building on our vast experience of successful delivery of low latency, high throughput trading systems to customers such as Turquoise and cost effective, highly reliable clearing-related systems to customers such as NYSE Liffe. We are offering a system dedicated to the emerging need for next generation clearing and risk management technology”, Nils-Robert Persson continues. “The clearing industry is undoubtedly increasing its focus on response times and cost efficiency. Cinnober is in an excellent position to set new benchmarks within the clearing segment.”

The past year has been very successful for Cinnober, the system supplier behind ventures such as Alpha Trading System, Markit BOAT, Quadriserv and Turquoise. In addition to these major new initiatives, Cinnober has also won new business from Burgundy, the Nordic MTF, and HKMEx, the new commodity exchange in Hong Kong as well as continuing to develop system upgrades and innovations for existing customers such as NYSE Liffe and London Metal Exchange.