OpenGamma Platform OpenGamma


OpenGamma is a relatively new addition to the risk management space. Its three co-founders were from the hedge fund market, with this the initial focus. Of late, it has moved into investment banks and central counterparties (CCPs), drawn by the need for historical VAR for initial margin calculations as part of clearing and settlement operations. In the latter capacity, CME and LCH are customers, with OpenGamma also gaining traction within their member communities. Reflecting the fact that the company has only been around since 2009, it has had an open source ethos from the outset, which is an interesting additional dimension to its profile. The company kicked off with investment from Accel Partners, FirstMark Capital, ICAP and Euclid Opportunities. To date, it has raised $23.35 million. A reason for the founders coming together to create the company was the belief that they had each been building the same solutions in their previous institutions. The commodity aspects of the solutions also drew them to open source. Co- founder, Kirk Wylie, now chairman, was head of software architecture for the front office technology division of KBC Financial Products, following on from a number of roles, starting in Silicon Valley, which brought familiarity with open source. CEO, Mas Nakachi, was nine and a half years at Calypso (head of sales in the US, Paul McTigue, is also ex-Calypso). VP of engineering, Mohamad Ait Si Brahim, was head of risk technology at LCH.Clearnet. The company had around 35 staff by mid-2014.


While the initial targets, hedge funds, make up some of OpenGamma’s customers, it was realised that, in part due to the ‘plug and play’ nature of their requirements, this shouldn’t necessarily be the main target after all. It started to do work for the main CCPs (‘all the main three letter acronyms’, according to marketing manager, Soila Patajoki), typically for their own internal risk calculations.


Demand particularly started to build for historical VAR-based


initial margin calculations, typically for OTC cleared derivatives. OpenGamma sells directly to the CCP members, sometimes on a formal or informal CCP authorised solution basis. Previously, banks often linked to the CCPs through internal developments,


The open source model


How does the open source aspect work? The source code, the analytics and models, documentation, details of bugs and product roadmap, and even which developers worked on which APIs, are available, hosted on the GitHub open source community hub. This certainly backs up OpenGamma’s claims of far greater transparency than with traditional software companies. There is also a collaborative approach to testing, bug fixing and development. In the trading space, the open source route is fairly well established, from the likes of Marketcetera, with an order routing engine


and market data adaptors, and Tradelink.org, with an open source trading platform, for which it claims 30,000+ users and 500+ developer members.


The OpenGamma platform is being made available via the cloud. One of the facilitators is Edinburgh-based Cloudsoft, which states its objective as accelerating ‘cloud adoption by providing enterprises with a software solution that lets them exploit cloud without losing control’. It further claims, ‘the Cloudsoft Application Management Platform (AMP) is the only autonomic open source multi-cloud application management solution’. OpenGamma is available via AMP.


Risk Management Systems & Suppliers Report | www.ibsintelligence.com 99


using the CCP’s APIs and libraries, but the need for more sophisticated activities, particularly for ‘what if’ scenarios, appears to have played into the hands of OpenGamma. It has also been increasingly the case, said OpenGamma global head of sales, Hugh Stewart, that as the budgets and resources of the banks have been reducing, so there has been greater emphasis on using these for value-added work rather than more standard developments. They can ‘do the DIY’ around the OpenGamma components. ‘Large sell-side firms are realising that funding costs and tactics can have an effect on their P&L and capital,’ said Stewart. OpenGamma provides a single window into multiple CCPs and initially started to do this for large investment banks. By mid- 2014, it was starting to see demand as well from tier two banks and buy-side players. The supplier expects to work with partners to provide its solutions on a Software-as-a-Service (SaaS) basis, with tie-ups being worked out in mid-2014. It was already available via the cloud (see below). For hedge funds, ‘real-time event-driven risk’ is usually the


priority, with classical market risk calculations and multiple methods of pricing. The market risk support is across fixed income inflation, forex and equity instruments, credit default swaps, commodities and generic securities. For margining, OpenGamma claims support for all major clearing houses and cleared OTC derivatives products. Instrument coverage includes: IBOR and OIS, fixed/float and basis swaps; zero coupon swaps; compounded; single/double- ended stubs; variable notional; Forward Rate Agreements (FRAs); and futures (Eurodollar, Treasury). As well as CME and LCH. Clearnet, OpenGamma has support for ICE, Eurex and SGX, with monitoring of developments from other CCPs, including Nasdaq and Hong Kong Exchanges and Clearing. In February 2017, The Japan Exchange Group (“JPX”)


purchased a minority stake in OpenGamma worth $1 Million. With the firm having already raised $13.3 Million in Series D funding in October 2016, this investment will help OpenGamma to continue its expansion in the derivatives risk analytics segment.


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