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Leading from the front

Clients and senior members of Calypso Technology discuss how its technology helps in a segment characterised by complex requirements

Featured in Securities Lending Times Collateral 2017/18

During the Calypso Client Conference in London, senior members of the Calypso product management and customer success management teams discussed how the firm’s Collateral Management solution is developing and how to anticipate the evolving needs of clients and the global financial markets. Some of the Calypso clients also shared their views on how the Calypso solution has helped to advance their business.

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Calypso Technology offers a cross asset, front-to-back collateral solution. How does it compare with other standalone solutions in the market?

Alan Sheehan, director of product management at Calypso Technology: Purely from a collateral management point of view, I think that the Calypso Collateral Management solution is equal to the ‘best of breed’ solutions. A key differentiator is the ability to offer a consolidated platform.

Firms are looking to reduce the number of systems in use and to simplify their processes. Infrastructure cost savings are still important but, increasingly, the business is demanding horizontal consolidation of exposures in a single solution. Calypso can address both of these concerns. Calypso displays a holistic view on risk and funding requirements across products and entities, facilitating quick and efficient decision making.

Furthermore, Calypso offers flexible deployment options: a standalone system for collateral, integrated with Calypso post-trade processing (offering the full suite of back-office functionality), or with the Calypso Securities Finance solution. In addition, Calypso provides a ‘Collateral as a Cloud’ service to further simplify the deployment and reduce costs. Clients can meet their needs for an advanced collateral solution quickly, with the option of expanding the usage in the future to reduce costs and reap the benefits from a consolidated, cross-asset platform for trading, risk management and full back-office processing.

Leveraging Calypso’s award-winning post-trade processing functionality allows us to have real-time visibility of the back-office processing, which is particularly important for collateralising the securities lending business.

Our ability to calculate margin requirements for both cleared and uncleared derivatives (using ISDA SIMM), including pre-trade what-if analysis, means that we can address our clients’ needs to comply quickly with the recent Initial Margin regulatory requirements. This, coupled with a centralised real-time inventory management view across products and business entities, together with post-trade optimisation, offers powerful tools for transforming the management of collateral.

The Calypso Collateral Management solution is standardised to create a best practice solution at minimal cost to our clients. We offer multiagreement support (including GMRA, GMSLA, ISDA CSA, and cleared OTC and ETD), as well as out-of-the-box connectivity to utilities and triparty services.

The Calypso workflows support the entire collateral management lifecycle. The central view of inventory enables organisations to optimise the use of their assets to cover exposures. Another reason Calypso stands out from its peers is the dedication to innovation and working in close partnership with our clients.

Can you give examples of Calypso-client partnerships supporting business innovation?

Sheehan: The market has been faced with recent pressures to comply with new regulations and cope with squeezed margins. Many firms have turned to technology to reduce costs and support business innovation. Some agile financial institutions have seized the opportunities the changing regulatory landscape has provided and have looked for a technology partner that can help to transform their business model and seek new revenue opportunities.

Alberta Investment Management Corporation (AIMCo) is one of Canada’s largest and most diversified institutional investment managers with more than $90 billion of assets under management. AIMCo selected Calypso Technology as its partner to simplify and consolidate its collateral management across separate portfolios and business units while also introducing a transparent structure for the optimal use of collateral.

Michael Baker, senior vice president of investment operations at AIMCo: Although we were facing the market under a single name, the management of collateral was decentralised and we were relying on multiple platforms and spreadsheets to monitor, calculate, communicate and process collateral for different strategies. This has been simplified with the implementation of Calypso’s Collateral Management module.

As the same counterparties were used across our internal entities, we realised that there was a more agile way of optimising the pool of collateral available but this would require a centralised view of inventory. We needed a new, centralised system architecture to provide the exposure and available collateral from each unit to our collateral management group while maintaining and displaying the owners of both.

We had a vision of a consolidated system that could give us a simple and transparent view across all funds, allowing us to optimise the use of collateral, seek new revenue streams and improve profit margins.

We selected the Calypso Collateral Management solution and worked in partnership with Calypso Technology to create a transparent portfolio lookthrough where it would be possible to allocate the exposure back to the eligible pools. In addition, the Calypso system offered the possibility to optimise the allocation of fund assets to external counterparties, including the use of rehypothecated collateral with the ability to track the source and destination of the collateral.

The Calypso system allows us to assign a value to the collateral depending on the various demands from different markets we operate in, and enables us to seek new revenue opportunities. The Calypso solution has provided us with a powerful centralised, real-time inventory management view which truly reflects our business model.

Sheehan: This is an example where we have worked in close partnership with a customer to deliver functionality to support its business transformation. This has been a benefit to AIMCo, Calypso and other clients as enhancements are made to our core Calypso product and shared across our client base.

Corinne Grillet, chief customer officer at Calypso Technology: Take the example of BNP Paribas Securities Services, which has a distinguished track record for providing premier client service and operational excellence. We are pleased to be trusted to support its end-to-end post-trade processing services with the Calypso integrated front-to-back architecture.

Amor Chebira, COO of market and financing services at BNP Paribas Securities Services: With the Calypso solution, we have been able to consolidate our securities lending and repo activities resulting in significantly improved collateral management capabilities.

How has regulation affected your development of the Calypso software?

Sophie Marnhier-Foy, principal product manager at Calypso Technology: In the past, margin requirements have significantly increased, with the implementation of the Basel Committee on Banking Supervision-International Organization of Securities Commissions margin requirements for non-centrally cleared derivatives, and the expansion of clearing mandates. Once the phased implementation has been completed, most derivative trades will be subject to initial margin, creating substantive costs in terms of collateral requirements.

Calypso Margin not only offers a tool for compliance with the new regulations, but also a solution to optimise the collateral and reduce the total cost of the trade. With Calypso what-if margin simulation, the cheapest trading venue can be selected, based on ISDA SIMM and major CCP OTC margin methodologies. Calypso Margin also offers post-trade margin calculation and decomposition reports, in order to validate and analyse the margin costs.

Sheehan: The BCBS-IOSCO regulation has been a big driver for us to ensure necessary tools were integrated as part of our standard framework. As an ISDA-licensed vendor, Calypso provides the ability to both calculate the initial margin requirement using ISDA SIMM methodology and process the initial margin using the Collateral Management solution, adhering to regulatory concentration limits, eligibility, wrong way risk and segregation.

Our tier-one clients have had to comply with the initial margin requirements since their introduction in September 2016. This should comfort our wider client base, which will be affected by the phased implementation of the initial margin rules, knowing that the system offers full support. In fact, some of our buy-side clients will comply with the initial margin rules earlier than the actual regulatory deadline to benefit economically from preferential pricing offered by their brokers.

As of March 2017, everyone had to comply with variation margin regulation. Calypso clients have been able to advance their business knowing that their system offers full support for both the initial margin and the variation margin regulations.

What is your current focus for developing the Calypso Collateral Management solution and how do you decide the direction?

Sheehan: All our developments are aimed at further enhancing the user experience, making Calypso easier to implement and to reduce the total cost of ownership.

The cloud deployment is an example of this. The Calypso Cloud solution further standardises the system for a quick time-to-market and reduced costs in terms of maintenance, upgrades, implementation, hardware and support. This is an attractive option, especially for our buy-side clients and medium-sized or smaller banks.

Data is a general concern in the industry—how to access it in real time and how to make most use of it. At Calypso, we are constantly working on improving our real-time dashboards and central views of inventory to provide full transparency for easy decision making.

Looking ahead, we are also analysing blockchain technologies, where we have a partnership with the R3 Consortium.

Grillet: We are proud to have a substantial client base and equally pleased to see it being so diverse, ranging from clearinghouses/CCPs, to large investment banks, asset management firms, pension funds and increasingly, hedge funds. In fact, nine CCPs rely on Calypso Technology, clearly demonstrating our leading vendor position in this segment that is characterised by rather complex requirements.

The diverse usage of Calypso demonstrates the depth and breadth of the functionality, as well as our close ties to all market sectors. We need to anticipate and respond to how new regulation is affecting different client segments across the globe.

In terms of our own roadmap, we always take on board feedback from our clients, along with discussions with regulators, as key drivers when choosing our directions for development. With more than 200 customers across our services and more than 55 live on our collateral product alone, we get a lot of useful feedback. We actively promote discussion with our clients, as well as between different customers themselves, through client conferences such as this, and by facilitating smaller user group meetings.



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Calypso Technology, Inc. is a leading provider of cloud-enabled, cross-asset, front-to-back solutions for financial markets, with over 40,000 users in 60+ countries. Its award-winning platform improves decision-making, risk management, controls and operational efficiency across financial market participants’ value chain. From the outset, the Calypso platform was designed to support customers on innovation, modernization and business growth, while enabling them to rapidly adapt to changing regulations.

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