Much of the attraction of doing business in Asia comes from its diversity. Different languages, history, states of economic development and regulatory approaches means that no two markets in the region are exactly identical. Any financial technology vendor hoping to succeed in the region must take this into account and be prepared to deal with the individual characteristics of each jurisdiction, including unique instruments, trade procedures and regulations. California-based Calypso Technology has implemented an extensive localisation programme to adapt its trading and risk system to the region's requirements and is now reaping the rewards.
"When we enter a new market, our initial discussions are with prospective clients, or existing customers if available, because they are in the best position to articulate their specific challenges. We also set up meetings with local regulators to ensure we get their perspective on the regional requirements. This is a critical step as we hear their reaction to what our prospects have already shared and also learn about any other issues that are top of mind. When available, we also attempt to get feedback from consultants and integration partners, both of whom can provide useful insight," says Boon-Huat Lee, managing director, Asia-Pacific, for Calypso who is based in Singapore.
Once the local requirements have been identified and defined, Calypso develops prototype functionality and takes it back to the clients and prospects for feedback. If necessary, it will amend the functionality, then when finalised, it is handed over to a product management team to integrate the local enhancements into the company's core product. In addition, the functionality is incorporated into Calypso's standard support and maintenance programme. As a result, the new localised features come as integral to the company's platform and its operations, without the need for any post-processing or workarounds, which are often difficult to manage and upgrade.
Lee gives the example of an instrument that is only traded in one particular country. "Even though it is a niche product, we would completely integrate it into our core product so that clients would be able to conduct all standard front-to-back activities, including pricing, straight-through processing and risk management. We would not require clients to rely on cumbersome steps, such as running scripts or exporting files into Excel spreadsheets, to benefit from the enhancement," says Lee.
Calypso demonstrated the process recently in India, where it enhanced its platform's forex risk management to support Reserve Bank of India requirements. For example, it extended its support for foreign exchange exposure limits to cover the RBI's net overnight open position limits guidelines. It also enhanced its interest rate front office to support Mibor (Mumbai interbank offered rate) overnight indexed swap pricing to meet local compounding rules.
Furthermore, Calypso added support for the pricing and valuation approaches specified by the FEDAI and FIMMDA, two Indian banking associations. And it has incorporated full lifecycle management compliant with the specific regulatory framework for the local forex merchant product for which there is a large business demand in the Indian banking industry. IndusInd Bank has been the primary beneficiary so far of this local functionality with its Calypso cross-asset front-to-back system.
In another instance, a leading emerging market bank is in the process of consolidating all its derivatives business on Calypso's front-to-back office platform, including market risk and limits management. "Calypso is willing to localise its system to support local products and practice, which not many companies would do. Without localisation, it's hard for the bank to achieve a single integrated platform," says the head of treasury operations at the bank.
Calypso is seeing a handsome return on its investment in its localisation programme. It has added six new clients in the region over the past year, as well as extending its engagements with another 15. It has signed its first client in mainland China and an established Thai client has implemented new support Calypso has added for the Thai forex flexi forward, as well as rolling out the system across all its subsidiaries in Laos, Cambodia, Myanmar and Indonesia - all new territories for Calypso. The company is also implementing its first system in the Philippines, for China Bank, and has added sub-custodial functionality for this local market.
"The sub-custodial functionality will allow our banking clients to act as the principal when trading, and as an agent to manage the same transactions in a single solution," says Lee. Calypso is also enhancing its fixed income front-to-back functionality to meet local withholding tax treatment in both the front office and back office, including amortisation accounting using the effective interest rate method.
China Bank cited Calypso's localised features when it chose the platform to replace its ageing treasury system and to support its future business development. "At the core of our decision was Calypso's dedication to understanding our unique business needs. Calypso's modern technology is highly scalable and will support our business direction and allow us to achieve our aggressive growth targets in the future," said Antonio Espedido, Jr., executive vice president and head of the financial capital markets and investment segment at China Bank when announcing the deal with Calypso.
The week on Risk.net, December 2–8, 2017Receive this by email