GFI rolls out pricing tool for structured products

Interdealer broker GFI in New York has released a new version of its pricing and risk management software, incorporating a structuring and pricing tool for structured products.

Fenics FX 10.1 enables bank salespeople to price complex strategies and strips in a secure-version-controlled environment and with post-trade straight-through processing.

The tool stores multi-leg strategies created by bank structurers in a database that can be immediately accessible by bank salespeople. The sales staff can then develop structured products based on the strategies to meet clients' requirements.

"These are high-margin products, so banks can spend a lot more time marketing them to customers instead of actually building them," said John Molley, Fenics FX product manager in New York.

For example, a structure would create a knockout-style collar using a knockout and a reverse knockout. The parameters of the strategies will be predefined and stored in a database. The bank salespeople can then immediately access the new strategy and use the strip generated to create a customised structure of knockout collars for clients. The tools can support multi-legs of over 100.

The products are then priced using volatilities pulled down from the Fenics core product, which has a live rates module to feed in rates, said Molley. He added that once the products are priced up they can be ticketed immediately into Fenics which then passes the details onto other systems, thereby reducing operational risk.

"Even with small structures with 50 to 60 legs, when you double- or triple-key things it's a significant operational risk, not to mention operational overhead," said Molley.

"But with the structuring module, there's only one version of these strategies in any point in time saved in the database. The salesperson just pulls up the name of the strategy and it pulls in whatever formulas or extra fields have been used to create the strategy." This ensures a salesperson cannot edit the fields with formulas in them without changing and breaking the name of that strategy.