ASX rolls out new software for OTC clearing

The Australia Securities Exchange (ASX) is rolling out new software that will allow Australian interest rate client clearing, which is to be launched by Q2 2014.

The software, provided by Calypso, allows for end-to-end over-the-counter (OTC) client clearing, risk management and connectivity between the ASX and investment banks.

“There are about 70 to 80 people on this project, so I would say it’s the biggest project right now underway here at the exchange,” ASX CIO Tim Thurman said.

The OTC client clearing technology project is part of ASX’s commitment to the G20 reform of the OTC derivatives market.

“From the global financial crisis a few years back, the OTC market has been put under a bigger microscope. I’m not going to mandate it, but a lot of the investment banks now are going to look to report these OTC trades,” Thurman said.

“So we are offering a new service to our clients here in Australia and many other exchanges globally. So we look at many other global exchanges in Europe and the United States, and a lot of them are doing exactly the same thing we are from an OTC clearing point of view.”

Thurman said he chose to use Calypso technology because of its integration capabilities; it was easy to integrate it with existing ASX systems and to exchange information with global ASX’s global partners.

“The complexity of integration in what we are doing for the clients, for our back office and also reporting to the regulators is what makes it complicated. So we have a big depository of data,” he said.

“We are looking to be more globally positioned with vendors that allow our international investments banks here in Australia to be able to connect to us a lot easier than having a very strict Australian built product. Calpyso offered that in terms of the integration globally. It also integrates well into our back office systems.”

The ASX also launched its dealer-to-dealer OTC clearing offer for Australian dollar-denominated interest rate swaps on 1 July 2013, using Calypso as the main platform. Thurman said he managed to deliver on this project in eight months.

“That’s probably the quickest time any exchange within the world has ever done,” he said.

“The development team with the vendor sat in one group which allowed us to deliver a lot faster using an agile methodology.”

The OTC clearing offering is to help reduce the portfolio margin requirements by “enabling clearing members to offset initial margin between their interest rate swaps and 24 ASX exchange-traded interest rate futures products positions”, the ASX said.

Rationalisation of databases

The ASX is also undergoing a re-architecture of back office, rationalising its databases to a centralised database, Thurman said. This includes merging data into the equity code so it can build more interesting products for its client base, he said.

Thurman said he is currently in the process of using Salesforce to rationalise about a dozen databases, which are like client data depositories, down to one.

“If you don’t have a centralised client database, then a lot of the data will get stale and outdated where you could be calling the wrong people at the wrong firm, and so forth. So the logical step was to bring all that data together so we can have a one view of our client base and not many.

“From a data point of view, it’s just making sure that we are being more efficient with how we manage our technology. By having multiple databases sort of doing the same thing, you have got a cost associated with that. So the idea is to rationalise those and reduce the total cost of ownership. It’s about being more efficient and reducing our operational expense with technology.”