When it comes to capital markets activities, many banks share the same fundamental goals: consolidate technology to reduce complexity and costs; move to a modern, flexible system architecture that supports business agility and growth; and meet the onerous regulatory compliance requirements and deadlines.
Some banks choose to tackle these goals simultaneously with ambitious multi-year projects, while others opt for a more staged approach, making tactical infrastructure upgrades while addressing immediate needs. One of Murex’s strengths is that it can support both approaches.
The depth of functionality, breadth of financial product coverage and workflow processes of Murex’s MX.3 platform makes the company a partner of choice for many banks wanting to transform and centralise their trading, risk management and back-office technology.
“The challenge for these banks is continuing the transformation while keeping in touch with the evolution of the markets and regulation. In this regard, technology can be an opportunity if managed well,” says Alexandre Bon, senior manager at Murex Southeast Asia.
For smaller institutions, the issue is often more about controlling costs while achieving compliance, says Bon.
To address this, Murex offers packaged solutions to meet the immediate needs of today’s regulations, such as the Fundamental review of the trading book (FRTB), portfolio hedge accounting under International Financial Reporting Standard 9 and bilateral initial margin rules.
Larger institutions can further customise the solutions as modules to their MX.3 platforms. Four Asian institutions have started implementing Murex’s bilateral initial margin module, with a further 10 in discussion about similar projects.
While regulators have pushed back the deadline for FRTB from 2019 to 2022, Murex has continued developing its functionality for the new rules in conjunction with a major Singaporean bank, and the lender is already live on the FRTB module well ahead of requirements.
Over the past 12 months, four major banks in the region have gone live with technology consolidation projects with Murex. China Merchants Bank successfully rationalised its capital markets activities on MX.3 to improve control over the lifecycle of transactions, streamline and automate operations, and support new business development.
The challenge for these banks is continuing the transformation while keeping in touch with the evolution of the markets and regulationAlexandre Bon, Murex
Another bank chose Murex to centralise its Treasury activities because of MX.3’s strength in market risk and end-to-end functionality. “Time to market is important for us, and we are now able to introduce new products quickly and integrate them into our control process,” says the bank.
Today’s regulatory and market requirements for things such as FRTB and the various trade valuation adjustments (XVA) require computationally demanding calculations. Murex was one of the first trading and risk vendors to adopt graphic-processing units to bring powerful parallel-processing capabilities to calculations, and it has also implemented a patented graph-oriented dependency tracing technology – a method of simplifying and speeding up calculations involving large volumes of data.
“We have been using graph technology in MX.3 for XVA calculations for a few years. It is also especially powerful in the context of FRTB internal model approach calculations, which consume inputs from multiple value-at-risk simulations across positions with varying regulatory liquidity horizons,” says Bon.
Murex has also been investing in cloud capabilities, working with Microsoft’s Azure and Amazon Web Services to ensure its functionality operates effectively in those environments.
“Cloud is an enabler for a variety of use cases for banks, and helps drive down infrastructure costs through dynamic provisioning of environments and elastic grids,” says Bon.
Singapore’s DBS Bank was one of the first to take advantage of the new facilities. It is using Amazon Web Services to extend the computational capabilities of MX.3 – a key platform for the bank’s treasury and markets activities – with significant anticipated benefits.
“In 2018, we expect a reduction of 70% of our Murex grid infrastructure cost, followed by a further reduction [of] 90% thereafter,” says David Gledhill, group chief information officer and head of group technology and operations at DBS.
A distinctive characteristic of Murex in the trading and risk technology arena is its attention to the back office. Where other vendors have often left this less glamorous but critical area to their clients or third-party systems, Murex has ensured it can handle the full lifecycle of trades, including confirmation, settlement, clearing, collateral management, accounting and reporting.
This reduces operational risk, and makes it quicker and easier for banks to introduce new financial products as the workflow is taken care of from front to back, says Bon. The company is about to launch a new version of its operations and control module with a dashboard of live indicators showing activity, performance and risk.
Banks are increasingly taking a longer-term view of their technology, looking to work more closely with fewer providers in making their plans.
“There has been a change over the past two to three years in that clients now engage us in a more advisory way, looking to discuss a strategic path to tackling the challenges ahead of them. They are seeing technology as an enabler, rather than an impediment to transforming their businesses,” says Bon.
One bank that has undertaken a platform-transformation process praised Murex as a “willing and flexible partner”, working to combine its technological expertise with the bank’s business knowledge to develop solutions for its market and regulatory compliance needs.