China Merchants upgrades systems amid global derivatives push

China Merchants Securities has upgraded its risk management systems ahead of planned international expansion and efforts to offer more derivatives, exchange-traded funds and warrants services

China Merchants Securities, the securities arm of China Merchants Group, has upgraded its international trading and risk management platform in a bid to meet the needs of its growing derivatives and securities business activities outside of mainland China.

"A combination of geographic expansion and product range growth prompted us to adapt a more international risk management platform," Zhi Luo, associate director of risk management at China Merchants Securities, told Asia Risk.

The Chinese securities firm has adopted New York-based Imagine Software's application service provider-based trading system to manage its international securities business. China Merchants Securities is primarily expanding its international operations in Hong Kong and the US. 

Luo said the new system needed to cover securities far beyond those traded in mainland China and it was essential to find a risk management platform that covered all asset classes and had the capacity to handle derivatives trading.

China Merchants Securities looked at four other risk management systems but Imagine stood out for its functionality and cost. Luo said Imagine's system is strong on trading strategy performance evaluation, such as option volatility performance assessment.

The use of international technology has also led to China Merchants Securities having more "awareness" of its core China business and how to "better manage risk of existing business", Luo added.

"But Imagine has room to improve to gain more China market share as it lacks fundamental market data for the Chinese interbank bonds market," Luo added.

China Merchants Securities is set to launch qualified domestic institutional investor products, exchange-traded funds and warrants soon.