Algo Collateral Newsletter

Algo Collateral has been voted first in the collateral management category of Risk magazine's annual Technology Rankings. The ranking is based on voting by international users of risk management software products. The full report can be downloaded from our website.

This accomplishment would not have been possible without the efforts of our staff and clients - we thank you all very much!

This past June, the Algorithmics Risk Conference featured a panel discussion, Achieving Best Practice in Collateral Management, which focused on practical issues facing institutions implementing a process under Basel II and the Sarbanes-Oxley requirements. Industry consolidation and increased regulatory focus on financial institutions have resulted in the need for transparent and effective internal risk management systems. Algorithmics has produced a case study on the approach of one of its collateral users, Credit Suisse First Boston (CSFB). The main discussion points of the panel discussion can be summarised as follows:

The Basel Committee on Banking Supervision has issued a proposal for a new Capital Accord, commonly referred to as Basel II, which will supersede the current 1988 Capital Accord. The new, comprehensive regulatory capital framework "is intended to foster a strong emphasis on risk management and to encourage ongoing improvements in the banks' risk-assessment capabilities."

In order to ensure compliance with Basel II, financial institutions need to have a full and in-depth understanding of all possible risks and the potential impact on the underlying processes. This requirement is ongoing and cannot be regarded as a 'one-off' compliance exercise as many firms have dealt with such issues in the past. In order to understand where a firm's risks lie, there is a need to assess existing data and processing capabilities.

Basel II and the impact of recent credit losses have ensured that credit risk management has gained significant prominence. The number of disputed margin calls is a key indicator of risk within the collateral management process, and credit risk departments require detailed information on the status of outstanding disputes in order to understand the firm's exposure to their clients. In the derivatives world disputes are commonplace. The collateral function is impacted by the upstream issue of outstanding trade confirmations and is often the first area to identify trade portfolio differences with the client. Add to this the impact of valuation differences, the lack of portfolio reconciliation procedures and the fact that most trade portfolios are constantly moving targets and there is a critical issue to address. For information on Algo Collateral aims to tackle this issue, see section Update on Algo Collateral Reconciliation Industry Initiative.

The growth of the derivatives business and the corresponding increased number of collateralised trades has considerably impacted the credit risk management and collateral arenas. Clients have realised that they can receive reporting via the collateral process and are exerting pressure upon collateral managers to provide them with detailed portfolio information.

Email management has been cited as a key issue, since it is now the standard method of report distribution to clients. Despite email's undoubted benefits, there is now an uncontrolled sharing of information, which can have serious consequences for firms and their reputations. The challenge of controlling this risk is one the majority of firms have yet to tackle.

 Since the last newsletter, we have held numerous reconciliation workshops for our clients. Four banks participated from Scandinavia, four from the US and another three banks in London. Clients came together for a couple of days, brought their portfolios, and worked through a reconciliation.

Again, the reconciliation workshops aim to: 

•  Identify common challenges in performing portfolio reconciliations.
• Review the Algo Collateral 4.8 reconciliation tool enhancements and usability, and provide feedback.
• Increase the usage of the reconciliation tool amongst Algo Collateral users. Come to an agreement that going forward users should continue to do reconciliations on a regular basis.
• Promote the usage of the 310 ISDA Reconciliation Template.

Throughout the workshops participants were pleased to have a close interaction with their counterparties. Various portfolio data issues have been recognized, for instance, missing important portfolio data and formatting issues. The workshops also lead to increased understanding of the reconciliation tool. As participants became more familiar with the tool and more comfortable with its functionality they agreed to use the tool for all reconciliations. At the end of these sessions participants not only walked away with their results, but also a set of agreed reconciliation steps. These steps can be put in place for 'real' counterparty reconciliations.

If you have any questions, comments or are interested in participating in a reconciliation workshop, please contact Elisa Nordstrom at enordstrom@algorithmics.com or tel: +44 (0) 20 7382 0126.

Through recent client meetings it has come to our attention that many of our clients are not using the online help file. We want to stress the importance and usefulness of our online help file, as we have specifically designed it to help our clients find the answers to recurrent support questions.

We continue to work hard at updating our online help, with more and more topics added with each release. You can already use the online help to find answers to a lot of your questions concerning reconciliation, event configuration, cash management, staging, static data and technical matters. In addition to this, with each release we have a 'What's New' topic, enabling our users to stay abreast of all the new functionality in Algo Collateral at the click of a button.

From 4.6.8 onwards, clients can launch the help file from the help menu in Algo Collateral. In order to do this, they need to save the compiled help file (Algo_Collateral.chm) into the folder where they have the Algo Collateral executable saved. Context sensitive help is also available in some screens and we are continuing to add to this functionality. This means that from within the screen clients can hit the F1 key and call up the help relating to that part of the system.

Clients using versions of Algo Collateral prior to 4.6.8 can still make use of the help file. However, they cannot launch the help from within the system and will have to use the search functionality to find topics of interest. The user double-clicks the .chm file to open it - they should be aware that the help is written for 4.6 so it may include functionality that does not exist or is different in earlier versions of Algo Collateral.

If clients want to document their own external modules and extension fields they can do so in any help-authoring tool. The help will be available under the External Modules and Extension Fields items in the table of contents, provided users compile Microsoft HTML Help files called Algo_Collateral_Module.chm and Algo_Collateral_Extension.chm and save these in the folder with the Algo Collateral executable. The only requirement to make this work is that the external module and extension field help files must also contain their own table of contents. From versions 4.8 onwards, context sensitive help will also be available for the external module and extension fields help. For instance, if a client clicks on an agreement extension field and hits F1 they will get the help specific to those extension fields and not just extension fields in general.

The help file is included on the CD with each new release. In addition, Algo Collateral has posted the file to General Documentation on the support site.

If you experience any problems using the help or would like to request additional documentation, you can log issues on the support site with an Issue Type of 'Document'. Alternatively, contact Ellen Swabey or Alison Duke with any questions or suggestions for improvements.

In response to increased client demand, standard training courses have been scheduled for 2006. By streamlining the delivery of training sessions and cross-training our clients, we aim to better manage the demand for training and the availability of our training resources.

The program for these training sessions can be found on the Algorithmics website. For further information on the training courses and availability, please contact Omar Taleb (EMEA) and Farina Hering (NA).

Over the coming year we will also be re-thinking our training courses and how they are structured. If you would like to be involved in this discussion or have any ideas/suggestions, please contact Ellen Swabey.

During the last couple of months, the global Professional Services (PS) team has gone through a major restructuring. In order to provide our clients the best possible support and service, and decrease our lead time for consulting, the PS team in EMEA is now divided into three management groups:

Support & Client Relationships, led by Barry Mole

Implementation & Upgrade Services, led by Omar Taleb

Consulting Services, led by Gerard Denham

In NA, the PS team has been divided into two management groups (team leaders for each group will be announced in the next newsletter):

Support & Client Relationships

Implementation, Upgrade and Consulting Services

Each group will interact across teams with the aim of providing seamless service and support to our clients. To meet our clients' expectations, the PS team has compiled a document called 'Algo Collateral Professional Services,' which displays roles, contacts, processes and request forms. This document can be accessed via the internal documentation on our Support Site.

Each team member has a comprehensive range of skills to support the implementation of Algo Collateral. Business analysts are involved in the complete life cycle of the project from the pre-sales demonstrations to post-implementation support, first-line business support, software upgrades, testing, advising on straight-through-processing (STP) capabilities and other functions of Algo Collateral.

The Algo Collateral team has grown significantly, from 30 at the outset of 2005 to 44 people altogether. The PS team has been adding new team members. The results of the restructuring will be noticed heavily as of March-April 2006, after an intensive training for new team members.

New hires in the EMEA PS team are; Steffen Lehmann, who brings development experience from his previous role at Glaxo Smith Kline. Raul Garcia Benito has a masters degree in computer science and previously worked for HP as an Analyst Developer. Similarly to Steffen and Raul, Diane Gordon brings development expertise from her previous role as a developer for Datapac business solutions. Elke Kikugawa has about six years of work experience after completing her degree in Business Administration. Elke brings valuable experience as an Associate Engineer for Business Objects/Crystal Reports.

A new recruit in the NA PS team is Swati Walimbe. Swati has seven years of experience in open systems development and has worked extensively with Informix and Sybase servers. She has developed business applications in the areas of Finance, Sales, Healthcare, Transportation and Logistics.

The Product team has also grown considerably bringing the team to a total of 8 people. Jeff Nadelman and Brad Oyler bring testing, QA and integration experience to the team. Jeff has ten years of software development experience working for companies like Bloomberg, Reuters, and more recently in consulting. He brings to Algo Collateral a focus on QA and process improvement including black box, white box, unit and regression testing. Brad has five years of experience, previously working for Merck where he was System Analyst, and Teknaspan as an IT consultant. He has experience in automated testing, .Net, Citrix and web development.

Sam Gentile was recently hired in the development team as a software architect with technology lead on V5. Sam is an internationally known .NET and Agile expert, functioning as one of 40 INETA speakers serving over 600,000 .NET developers in 81 countries. In addition, Microsoft has awarded Sam with a Most Valuable Professional award (MVP) for this year in Solutions Architect. Sam has a 22-year history in software development having worked for Microsoft, Groove, and most recently as the Chief .NET Architect for Adesso Systems, building highly complex, occasionally-connected and Mobile architectures coupled to Smart Client platforms. Sam has been with the .NET program since 1999, two years prior to general release. He maintains a highly regarded .NET and Agile Blog. Aaron Feng recently joined the development team as a Software Engineer. Aaron was previously employed as a Software Engineer for Advanced Systems Technology in Pensacola, FL.

Banu Apers has joined Algo Collateral from KBC Bank NV and has assumed responsibility for business development. During the last two years, she was in charge of setting up the Securities Lending Desk at KBC. Banu has five years of collateral management experience divided between KBC Bank and Barclays Capital in London. Her experience covers various business lines and different roles in collateral management activity. In addition to her position of business development, Banu takes over the role of dedicated pre-sales for Algo Collateral in EMEA.

We welcome all our new members!

Our London office has moved and our new address is:

5th floor
New Broad Street House
35 New Broad Street
London
EC2M 1NH

Our support number is: +44 (0) 20 7382 0154