Algo Collateral Newsletter

This summer has been busy with the addition of new system features and functionality for the upcoming Algo Collateral Version 4.6. Version 4.6 introduces .Net technology and includes new functionality in the areas of Cash Management and Workflow, Security and Staging, and support for the Letters of Credit business. Version 4.6 will be ready for general release to clients in mid-January.

The Algo Collateral support site contains a document (4.6_enhancements_summary_final.xls) that summarizes all enhancements in Version 4.6. If you do not have a User ID and password to the support site, please email a request for these to your respective Algo Collateral regional client support mailbox (see bottom of this newsletter).

For a summary of planned functionality for version 4.6, please contact Alex Boguslavsky, Product Manager, Algo Collateral at: 856-642-6101.

Listed below are some of the new functionality added to Algo Collateral Version 4.6, the majority of which were gratefully tabled by several Algo Collateral clients. Thank you for the input to date.

Expanded Security and Staging functionality.

Staging of Exposure Trades and Collateral Trades

Collateral managers often override values such as the MtM and independent amount values, at the transaction level. The 4-eyes feature can now be used for these types of changes in the exposure repository. Loading trades via the API Toolkit will not be affected by staging functionality, which applies only to manual modifications. As more Algo Collateral clients build STP functionality into their settlement systems, collateral managers need to ensure that the data flowing automatically to the settlement system is correct. Therefore, the 4-eyes feature can also be used to changes in the collateral repository (either through the workflow or directly into the repository).

4-levels of granularity to tables

With the current functionality, users can have either read-only access or full write access to the information stored by Algo Collateral. In version 4.6, the write function has three different types of actions (insert, delete, update). Security permissions include insert (for example, when creating a new agreement), delete, update (for example, when modifying an existing collateral agreement created by a different user) and read (user can only read-only the information).

Permissions at field level

Many clients have requested this functionality to be included in Version 4.6. The roles of the security module can now be defined to have access only to certain fields of the screens. Version 4.6 allows new selections to be defined and specify exactly which fields can be accessed. The selection is then applied to a role, and Algo Collateral will disable the fields on the screens that the user has been denied access.

Enhanced cash management and workflow capabilities.

Collateral managers require greater flexibility for the constant changing counterparty requests how to handle the interest of a particular month. This does not always reflect what is written down in the collateral agreement. For example, the CSA may specify that interest is paid out every month, but the two parties agree that interest will be rolled into the credit support value. Algo Collateral now allows for a generic interest event that can be transitioned into either a Distribution or a Roll Interest event.

Algo Collateral allows users to make an ad hoc interest distribution, such as where a request is received from a counterparty to make an ad hoc interest payment, even though no collateral movement has taken place and no payment is required under the terms of the CSA. Unlike older versions where this was possible only with manual adjustment of the agreement parameters and the interest periods, the interest periods are now automatically reset in Version 4.6.

Funding index functionality has been added for interest on Cash positions. Clients can now track the difference between what they have to pay on cash to customers each night versus what they make from their funding desk. Additionally, Version 4.6 allows entry of different interest terms based on who holds the cash (ie. separate interest terms tabs for principal and counterparty under each agreement).

Version 4.6 supports accruing interest on interest (ie. the possibility to roll in unpaid accrual from last calendar period into the new period, and accrue interest on it).

Workflow logic has been re-engineered for collateral movements (and replaces previously used event labels), utilizing settlement lags, instruction lags, and settlement locations. In-Transit collateral movements now apply transit end date based on settling locations and custodians, as opposed to managing location.

Version 4.6 introduces new and flexible 'Event Generator' functionality that can trigger a variety of Events based on user defined comparison criteria. A new Action Type called 'Comparison' is also added. Generic data comparisons can be performed between values of data fields within the Algo Collateral database and either user-entered values or values of other fields and tables in the system. A workflow can then be built around the alert event.

Version 4.6 supports Letters of Credit and other forms pledged assets such as collateral. Supported instrument types include Documentary and Standby LCs, Bank and Parent Company Guarantees, as well as pledged assets such as Real Estate. Algo Collateral supports the processing of LCs within the workflow, as well as a variety of LC-specific eligibility rules and valuation methodologies.

Technological Advances

The migration of Algo Collateral code to .Net is the first step towards comprehensive performance improvements. Some of the immediate benefits of .Net in Version 4.6 are as follows:

• Improved code debugging features
• Improved security and reliability features
• Allows external modules to be written in any .NET supported language
• COM Interoperability (ie. existing external modules do not have to be converted)
• Easier deployment (ie. no registration of dlls required)
• Leveraging the .Net technology is the next major step. Algorithmics will begin by re-designing Algo Collateral using Web Forms and ASP.NET (this will allow for both Windows and Web GUIs). Longer term, this will move Algo Collateral towards a true three-tier architecture with the creation of a Middle Tier that offers greater scalability and reliability, and takes advantage of .Net's ability to support conventional n-tier applications, web server applications, or a combination of both.

Algo Collateral's QA testbed has expanded considerably since Algorithmics introduced its new QA and unit testing procedures. Improved release management and testing procedures were discussed during recent User meetings in both New York and London. The new testing procedures have effectively located and eliminated any bugs within Algo Collateral Version 4.6. Algorithmics has compiled comprehensive test plans for each new feature that is added as well as a series of regression tests for each functional area within Algo Collateral. Additionally, Algorithmics continually expands its performance benchmark tests, which compare system performance between versions releases, between database servers (ie. Oracle and Sybase), and across a variety of machines of different microprocessor and memory configurations. Algorithmics will release performance benchmark results to clients once Algo Collateral Version 4.6 is made available generally.

Rare "object not supported" error messages may be encountered by Algo Collateral users that are ugrading to Windows 2000 Service Pack 4. When Windows 2000 Service Pack 4 is installed, it overwrites one of the dll's (file msvbvm60.dll) in the WINNTSystem32 directory used by Algo Collateral and does not support the same interface.

To avoid these errors, follow these steps:

• Upgrade to SP4 of Windows 2000.
• Copy the msvbvm60.dll file from the Algo Collateral CD to the directory containing the .exe file.
• Do NOT register the file. Algo Collateral will still reference the file successfully from that location.
• Learning Curve
• Reports can now be generated and exported in PDF format in Version 4.4.13 of Algo Collateral and higher. Crystal Reports version 8.5 is required. 
•  In version 4.4.13, users can define a maximum of 10 extension tables for legal entities as well as collateral and master agreements.
• Users can specify an 'As of Date' when running a Margin Calc for a single CSA from the Agreements screen.
• Concentration Risk User Group

 Algorithmics is planning a series of conference calls and meetings with interested clients to discuss requirements for a Concentration Risk module in Algo Collateral. To participate in this working group or obtain a copy of Algorithmics' white paper on this topic, please contact Kathleen Conlon or Barry MacNamara.

Algorithmics would like to thank those clients who have submitted enhancements requests for Algo Collateral Version 4.8 and encourage others to provide feedback on these suggestions. The deadline for Version 4.8 enhancement requests is November 30, 2003. Submit your requests on the Algo Collateral support site or contact your Algo Collateral professional services representative. Algorithmics will post a preliminary list of enhancements for consideration on December 15 on the Algo Collateral support site.

Algorithmics would like to welcome the following new clients to the Algo Collateral community:

• Abbey National Treasury Services plc
• Banca Intesa
• Bank of America
• BNP Paribas
• Commerzbank

Richard Barton has transferred from Algorithmics' Singapore office to the US, and is now Manager of Professional Services for Algo Collateral in North America. Richard has been with Algorithmics for 4 years and after starting in the Algo London office, he has now worked in each of the major Algo Collateral offices globally. He understands both the technical and business related aspects of Algo Collateral very well. The North American Professional Sservices group is now offering formal training classes at Algorithmics' New York office. For more information, please send an email.

Greg Ballesty handles first line phone support for clients in the Asia Pacific and Australia regions. Please continue to send your emails or contact Greg by phone on 61 2 8354 6107, in the Algorithmics' Sydney office.

Congratulations to Elena Lorente on her promotion to Manager of Professional Services, EMEA! Elena and her team have been actively working on several projects throughout Europe. Two new professional services consultants have joined Algo Collateral in EMEA: Alan Quigley and Fabio Giacoppo. Welcome aboard!

Algorithmics is holding an Information Session on Algo Collateral in our New York office on November 20, 2003. The session focuses on the use of hedge funds with Algo Collateral. For more information please refer to the agenda on the website.