FNX debuts module for structured bonds

FNX is taking its first step towards providing a centralised risk backbone for trading desks, with the release of a module that governs structured bonds and emerging market debt. The module will be offered as an add-on for FNX’s flagship Sierra system.

The structured bond module was developed for trading desks -now working mostly by sector - to manage complex transaction structures that might be a combination of interest rate, foreign exchange and equity instruments. They may also involve embedded options that would enable issuers to call them before maturity, said Jim Dennelly, head of product management at FNX. For example, trading desks that are focusing on the transportation sector might have to oversee a cornucopia of transactions, including bonds, commercial paper and foreign exchange, as well as credit and interest rate derivatives, Dennelly said.

"We’re expanding the Sierra architecture to handle exotic products," Dennelly says.

The new module, available now, allows users to construct customisable structured bonds that exploit multiple asset classes. Users will be able to book, price and process sophisticated structures in real time. The structured bond instrument is likely to consist of multiple legs, different payoff formulas and user-definable fields. The module is intended as an improvement over spreadsheet-based systems that can be riddled with errors and may require the re-keying of information.

As part of Sierra, the module also helps facilitate straight-through processing capabilities for such complex transactions.

The module was developed in conjunction with the fixed-income trading desks of an undisclosed major firm, with the hope that users could better manage the stages of a trade and lower their operational risk.