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Clearing House Risk & Margin Engine

A leading global clearing house needed a partner to help them envision, architect and implement their next generation risk and margin platform, ultimately replacing a successful legacy platform.

The Challenge

In order to retain its leadership position, the client embarked on an ambitious project to offer clients a new risk and margin methodology across all cleared products. The diversity of asset classes and the rate of change in the market required the end product to be robust, scalable and flexible.

Performance was and remains a fundamental concern. The CCP processes millions of executions for thousands of clearing participants. The risk engine needs to meet stringent SLAs for real-time, ad-hoc and batch requests, as well as being able to support diverse quantitative requirements by integrating with third party or internally-developed analytics libraries.

The Delivery

A multi-year program, Risk Focus has been on the frontline since day one. Risk Focus engaged initially in an advisory capacity, providing a Senior Partner in the role of independent architect to the client risk program. Risk Focus helped run an evaluation of market technologies and vendor choices that saw most of the well-known vendors fail to meet the grade for either product coverage or scale – sometimes both.

In the end, the decision was to build the CCP a custom architecture with Risk Focus as the delivery partner of choice, providing a team of technology experts, as well as the acceleration and amplification of a disruptive software stack (Risk Focus proprietary technologies + partner solutions: OpenGamma®, ActivePivot®, and Splunk®). The initial 90-day phase proved Risk Focus’ ability to meet the minimum scalability requirement – calculating margin (full reVal, HVAR based with 5 year look back) for 1M swaps within 10 minutes running on commodity hardware.

The Result                                                      

Currently in pre-production mode, the platform has met all milestones. The platform includes:

  • Multi-regional support for batch, ad-hoc, and near real-time requests
  • Integration with vendor and in-house analytics running under unified market environment and request management
  • Linear scalability on a commercial grid architecture and smart request batching
  • Segregation of compute and aggregate allows for stateless compute model, which avoids long-tail compute tasks typically required by aggregation levels
  • Full operational intelligence is exposed across multiple components and various calculation nodes using Splunk®

The client now has a new strategic architecture that helps future-proof their business and gives them a platform on which to build their next generation of risk and margin tools.

 

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