Algo Collateral Newsletter

The Algo Collateral team was approached by many of clients beginning this year asking whether feeds would be built between Algo Collateral and legal databases, for not all clients keep the collateral agreement parameters in Algo Collateral, but in separate legal databases as well.

When collateral agreement parameters are kept in Algo Collateral, a separate role or permission is usually created for users from the Legal Department. This role gives them access to the relevant collateral agreement parameter screens in Algo Collateral.

If collateral agreement parameters are kept in both a legal database and Algo Collateral, the Legal Department may not have access to the operational margining tool. In this event, the collateral manager will set up all agreement data after having received a signed copy of the collateral agreement from the Legal Department. Appropriate roles will have been defined and the risks involved with the said collateral manager can be minimized through use of our 4-Eyes module. However, 'dual entry' may occur, leaving room for operational error. Some clients have asked for a solution where data is entered only once in the legal database, and then automatically fed into the collateral system.

To date, Algorithmics has worked with two legal database software providers VÖB-Service GmbH (LeDIS solution) and Framesoft (Framesoft Contract Repository solution). Clients can advise Algorithmics to speak with other legal database providers or have Algorithmics build a custom link between your in-house legal database and Algo Collateral.

The underlying infrastructure for the link to both systems is the same; data is exchanged between Algo Collateral to the legal database. Collateral agreement parameters are entered into the legal database, which creates an XML file in a specified format used by Algo Collateral to load the information. An import action will update Algo Collateral with data as it becomes available or is altered.

An XSL stylesheet is used to import the data from the legal database file into Algo Collateral's format. Careful consideration is required concerning the static data set-up in both systems; users can either choose to use the same naming conventions or translation tables will be built into the loading process. This data does not automatically replace the collateral agreement parameters used in the live margin calculations. The data will be in 'staging' mode and the changes will have to be approved by the collateral manager through the 4-eyes module.

The components required to implement this feed are Extension Fields, Extension Tables, Screen External Modules, XML, XPATH and XSLT, the 4-eyes module and the legal database connection module. All items are core components to Algo Collateral Version 4, except the listed modules.

Even though our standard offering contains a complete mapping of all relevant fields, the implementation of the interface allows for client specific customizations. The following are some aspects that are not supported by the default implementation and are considered client customisations:

• Support to extract other non standard fields (memo texts, adjustments screen)
• Support to import other non standard fields (to be stored in extension fields and extension tables)
• Support of a different version of the original standard legal database file
• Support for Alias and extension fields when products, currencies, eligible collateral buckets, legal entities and different configurable objects are not defined with the same names between Algo Collateral and the legal database
• Enhancements to the 4-eyes principle default functionality
• Enhancements to the screen external modules (for example, security enhancements)
• Enhancements to the feedback from the export/import data (for example, if some default action has to be executed when the integration is finished)
• Documentation of all modifications
• LeDis

The feed from the Ledis legal database to Algo Collateral is almost complete. Bayerische Landesbank of Germany will be the first bank to implement this new functionality. "An automated link between LeDIS' legal database capability and Algo Collateral's flexible cross product collateral management tools promises greater efficiency in the collateral process for any financial institution. We will benefit from this automated link because the agreement terms contained within the LeDIS system can be easily imported into Algo Collateral to create the appropriate master and collateral agreement necessary to control the margining process", said Claudia Gutke at Bayerische Landesbank.

An automatic feed from Algo Collateral into Ledis has not been developed and will be built in the near future.

The feed from FCR to Algo Collateral, and vice-versa, is nearly complete. A number of joint clients are interested in implementing this link.

One of ISDA's Collateral Working groups this year focuses on the formats to exchange collateral data. The working group is tasked to define a minimum set of data to be exchanged when in dispute with counterparty, and describe each data field both in excel and in XML. This process is basically an extension of Algorithmics' 310 initiative, and more information will follow in an upcoming newsletter. Finally, the working group is also tasked to define content and describe each data field in XML format that could be exchanged between the legal database and collateral operations system. For more information on how to become a member of this working group, please contact edewaele@algorithmics.com or dileepa.karunadasa@barcap.com who are co-leading this working group.

Information Sessions on Algo Collateral are held throughout the year. All seminars are free of charge and are focused on the design and implementation of an efficient collateral management operation. Algorithmics clients are welcome at these events as they present great networking opportunities. Algorithmics has held Algo Collateral roadshows in Paris, Frankfurt and Vienna, and three more are planned before the end of the year, including London, Milan and San Francisco. For more information please visit our website

Algo Credit Conference "Working Toward BIS II"
The fourth annual Algo Credit Conference will be held at the Ana Grand Hotel in Vienna, Austria from November 20 - 22, 2002. The Algo Credit Conference will feature a number of relevant industry topics including keynote addresses, panel discussions and presentations. Topics such as BIS II, real-time credit limits management, mark-to-market for loans, and the benefits of enterprise credit risk will be discussed. For more information about the Algo Credit Conference, please continue to visit the web site.

Bayerische Landesbank recently purchased a license for Algo Collateral, and represent Algorithmics' sixth client in Germany using Algo Collateral. Additionally, Danske Bank has also purchased a license for Algo Collateral, representing Algorithmics' first Scandinavian client in the Algo Collateral market.

Jeremie Spriet, from Roubaix France, has joined Algorithmics as a member of the Algo Collateral London team. The London team can now assist you in English, German, Spanish, Afrikaans, French and Dutch/Flemish.

• Populating the threshold grids does not require you to type in every single number as a whole one by one.
• You can type 'm' for a Million and 'k' for a Thousand.
• When a number is the same for a whole column, it is sufficient to enter the number once, then select Crtl+C, select the whole column and press Ctrl+V. This will copy the whole number down.
• You can also copy a whole column to another column.
• Finally you can drag and drop the Principal grid onto the Counterparty grid.