Algo Real-Time Credit Engine
Toronto-based vendor Algorithmics has integrated three previously incompatible systems into its Real-Time Credit Engine. The Algorithmics RTCE combines end-of-day batch exposure calculation, pre-deal credit exposure and limits management systems, and credit valuation adjustment (CVA).
The engine uses Algorithmics’ exposure calculations in combination with CVA to calculate the incremental impact of a new trade. Algorithmics says this helps clients ensure profitable deals are undertaken, risky deals are hedged effectively and traders remunerated appropriately, based on realistic transfer pricing.
Scotia Capital, the Canadian investment bank and capital markets business, will be using Algorithmics RTCE from November. Scotia’s managing director of financial engineering, Mark Engel, says: “The combination of having the integrated credit and market risk systems is really the lynchpin. Other companies had more mature products, but didn’t have the bench strength or the analytics capabilities. Competitors could assimilate well in the commodity rate space, say, but not the interest rate space. Algo was very open-minded and receptive about our suggested changes. They said ‘we understand what you are after’. That was very important to us. Other companies weren’t as receptive.”
Algorithmics says integrating three systems into one will reduce client costs, as well as improving risk controls. Engel agrees. “Every system has its own idiosyncrasies and now I only need to have experts in one system. Cost is certainly a driver. But we also know Algorithmics will continue to develop the product in a way that adds value to us.”