KGR, JRisk/TopOffice and Turaz
However, the picture then changed as a result of a sequence of events that saw Misys combined with the trading and risk business of Thomson Reuters. The facilitator was US private equity company, Vista Equity Partners. Thomson Reuters had publicly sought to find a buyer for the non-core business and Vista had gained this in 2011. At its heart it had the Kondor+ system. This was traditionally for the front and middle office, for tier three and four banks. Reuters added a back office, KTP, and then built a more integrated back office for Kondor+, which was sold as K+TP but then came under the overall Kondor+ branding, with the claim of fully integrated front-to-back office support, which brought it more squarely into competition with a number of other front-to-back office systems, notably (despite all the subsequent talk of synergy between the product sets), Misys’ Opics.
On the risk side, in mid-2005 Reuters launched what was claimed to be an enterprise-wide risk offering for managing limits and credit exposures for banking and trading books. Based on Linux, this offering, KGR, came with an initial Basel II module and was to use grid technology to power an internal risk engine for Monte-Carlo simulation-based Potential Futures Exposures (PFE). IBM, Intel and DataSynapse worked with Reuters on the solution, which underwent performance benchmarking on IBM’s Blade Centre technology with Intel processors in a Red Hat Linux operating environment. Early results claimed by the vendors showed that a full PFE analysis for ‘an average bank’ could be done in under five minutes. Added over time was enhanced performance for end-of-
day Value at Risk (VaR), improved intraday calculation support and facilities for scenario testing. Via a release in 2010, it was claimed response times would go from several hours down to less than one minute for the most complex calculations and that this would allow a shift from end-of-day to intraday in many areas. There was also a new user interface, with the flexibility to cater to the different needs of traders and risk managers. The new release was in beta test by April 2011, with availability from June. KGR came to be positioned as a real-time credit and market risk system to allow risk managers to monitor risk across the enterprise. Not surprisingly, it sold well in an environment of ever tighter risk management, benefiting as well from Thomson Reuters’ reach and financial services footprint. The supplier was claiming around 200 users of KGR in late 2010, with a few large banks and many small to mid-tier. While coming to claim full support for market risk, from around 2006, the bulk of the users had it for credit risk.
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The credit risk element of KGR was designed to
consolidate exposures across multiple business units, and from multiple front office systems, covering all asset classes. It also supported Basel II economic capital calculation and reporting requirements in relation to credit risk. Handling credit limit management in real-time and interfacing directly with traders’ screens so they could manage bank exposures before trading, KGR was designed to provide tools for credit managers to manage limit breaches. As well as producing real- time messages any time a limit was breached or a violation made (including deals on expired limits, or traders on locked counterparties), traders could also perform pre-deal checks and then request online authorisations to exceed a limit if the deal would result in a breach. The authorised credit manager could then approve or reject the request and a message would be sent automatically back to the trader. The Credit VaR module also used Monte-Carlo simulation to estimate portfolio loss in the event of a counterparty’s default and/or credit rating migration. The more recent market risk element of KGR was designed
to provide an enterprise-wide solution for measuring and managing market risks across all banking activities. Aggregating market risks from multiple front office systems and multiple pricing tools, it also leveraged existing pricing functions in the front office, which was meant to eliminate pricing inconsistencies between the front/middle office and risk management systems. The architecture also facilitated the addition of new products and enabled users to gain a consolidated view of market risk as well as manage limits globally. It also supported VaR calculations, stress testing, reporting, and data integration. One other important piece, which is in the mix within the Misys MGR risk offering, was added in 2006 when Reuters acquired trading platform provider, Application Networks, and its JRisk system for $41 million in cash. Application Networks was set up by a number of ex-Renaissance Software staff and had grown to 55 staff, with a handful of tier one banks as customers. The initial purpose of the JRisk acquisition was to obtain a cross-asset derivatives trading platform, as well as gaining traction in tier one banks and providing add- on modules in the interim for Kondor+ until a fully fused solution was ready, scheduled for around 24 months after the acquisition. In parallel, support for the new asset classes would be added to the back office to Kondor+, K+TP. It was hoped this would allow Reuters to compete with the likes of Murex, Calypso and Misys’ Summit. However, just a few months later, the tack with JRisk had changed somewhat, with the focus shifting to liquidity
Risk Management Systems & Suppliers Report |
www.ibsintelligence.com
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