LUXOFT MARKETS ENGINEERING ALPHA [ABS]

Transcription

1 LUXOFT MARKETS ENGINEERING ALPHA [ABS]

2 Engineering Alpha Complex and volatile markets demand technology that moves you forward, not holds you back Luxoft Markets gets it. We know the ABS business. We understand business critical. We move quickly. And, we deliver on time. Whether you are mining loan data to identify undervalued bonds, launching a new shelf, or enhancing risk analytics for the latest regulatory demands, our management team with 60+ years of securitized products experience is your partner for success. Luxoft can analyze your needs, design a strategy, and build the tools you need to maximize trading profits and minimize risk. Luxoft Offering Technology Advisory Independent, practical, jargon free advice to achieve specific business goals Guidance on key technology decisions tailored to business strategies Bottom line focus on maintaining agility and long-term value in volatile markets 2 Business Software Development Front to back execution capabilities, interfacing directly with non-technical users Predictable and transparent cost structure Quantifiable long-term productivity gains with robust economy of scale Business outcome driven pricing model Technology Outsourcing Quality resources with strong technical backgrounds and solid business experience Fluid scaling as business needs expand and contract Reasonable costs, leveraging global talent pools and economies of scale Business-savvy management

3 Luxoft Expertise Luxoft Markets Trading Systems Desk tools Pricing Research Valuation Security and Loan data Risk Management PNL prediction, explanation, attribution Performance tracking and monitoring Regulatory & Compliance Vendor Product Experience Intex Loan Performance Bloomberg Trepp Thompson Reuters Markit FICC EMBS Trioptima EJV 3

4 PAVING THE WAY FOR RE-ENTRY INTO THE SECURITIZED PRODUCTS MARKET FOR A GLOBAL INVESTMENT BANK Client Situation & Challenges Major global investment bank decides to simultaneously and aggressively expand CMO, CMBS, and ABS issuance and trading Prior to re-entry technology organization was tasked with quickly ramping up front-to-back platforms to support the businesses Historic under-investment in technology left the businesses with outdated systems and limited technical capabilities New business strategies required new breed of analytical & pricing tools Necessary balance sheet allocations were withheld pending satisfaction of new and demanding analytical requirements from risk control and finance Technology teams found that growing inhouse technology staff or deploying a vendor solution would not feasibly achieve objectives within short timeframes Luxoft Solution & Results Bank partnered with Luxoft to expand IT bandwidth for control requirements, freeing internal teams to focus on trading desks Within 3 months Luxoft provided required skills and scale, deploying over 30 technology professionals to the job Phased approach was agreed by stakeholders to meet all major requirements over an aggressive timeframe Successful execution of early phase targets helped business to establish credibility and trust with control functions Majority of balance sheet allocations were approved within 3 months, as scheduled Multi-billion dollar trading operations achieved within first year 4

5 HELPING A GLOBAL RATES BUSINESS ACCOUNT FOR COLLATERAL IMPACT IN PRICING Client Situation & Challenges Needed to differentiate customer pricing based on Collateral Support Annexes (CSAs) Legacy systems valued most trades at LIBOR flat Needed trading desks to focus on market spreads Needed to manage cost of funding risk Regulatory risk without measure of collateral impact on PNL and risk Initial big hammer solution to Multiple Cost of Funds (MCOF) left many open items: Large backlog of mandatory enhancements and trade migrations Internal IT team could not complete full set of enhancements within mandated timeframes Threatened to consume all IT bandwidth in the affected spaces Short cuts taken to put initial solution in place left undesirable operational costs and risks Luxoft Solution & Results Bank partnered with Luxoft to expand IT bandwidth for front-office flow risk and valuation system Within 3 months, Luxoft provided 20 technology professionals Critical path feeds team was completely outsourced to Luxoft, including phased migration to output-based managed service QA department 80% staffed by Luxoft streamlined release process and contributed to radical improvement in on-time delivery Luxoft partnered with technology team and stakeholders to migrate over 40,000 Emerging Markets trades into an MCOF aware risk and PNL system With Luxoft s help, bank was able to honor all relevant regulatory commitments Luxoft s assistance with MCOF-related work enabled the internal team to deliver significant enhancements to intraday risk for the trading desk The most significant operational risks, including double entry and manual intervention in daily risk calculations were eliminated 5

6 Helping a global investment bank re-align business and technology strategy Client Situation & Challenges Global Investment Bank decided to derisk, exiting securitization and complex derivatives and scaling back flow fixed income trading The strategy for shuttered businesses assumed a gradual ramp down and unwinding of holdings and operations over 5+ years The bank wanted to move the streamlined flow businesses onto a new unified front-office technology platform over 2-3 years Maintaining a reliable technology platform for both exited and ongoing businesses was essential to facilitate smooth transformation Managing technology costs in line with declining revenues presented serious challenges due to a number of factors: Fixed costs associated with keeping a large number of highly complex and interdependent IT systems required to support operations of any size Key person dependencies and heavy attrition in IT resulting from inability to offer career incentives to stay with non-strategic businesses Ongoing, changing regulatory requirements Inherent complexity and agility of front office technology rendered traditional outsourcing options unviable 6 Luxoft Solution & Results Bank partnered with Luxoft to fully outsource operational ownership of technology platforms covering legacy ABS, RMBS, Structured and Exotic Rates and Credit derivatives businesses and ongoing CMBS, Flow Derivatives and Corporate Bonds Luxoft s innovative managed service solution represents a new structure and business philosophy for IT services industry: Unique domain depth, seniority of management team combined with strong engineering skills Front to back execution capabilities, interfacing directly with business users and regulatory functions with minimal oversight from CIO 100% business outcome driven pricing model Predictable and transparent cost structure Annual guaranteed run-rate reduction through continuous productivity gains Flexibility to grow and reduce delivery bandwidth quickly in line with business demand and without reputational and financial burden Results: Immediate cost savings delivered by transitioning majority of work (100+ roles) to Luxoft IT centers in Eastern Europe Core technology expertise retained Transition of IT portfolio successfully completed in 90 days

7 Helping A Fund Reduce Operational Risk and Streamline Reporting Client Situation & Challenges Large global fund with over $40 billion under management, holding a diverse inventory of ABS securities, consumer loans and derivatives, decides to take on additional business based on their track record of success New strategies required revamping of technology infrastructure to demonstrate operational control to prospective clients and regulators Historic under-investment in technology led systems development to target short-term tactical needs rather than the strategic long-term view Majority of reporting solutions built and maintained by consultant staff in a desk development environment lacking consistent standards Experiencing frequent outages due to ad hoc nature of product delivery and lack of integration with custodian processes Reliance on manual processes for reporting and trade decision support leading to slow time to market and unnecessary operational risk Attempts made to hire in-house staff faltered due to difficulty scaling up and becoming productive in the time frame required Luxoft Solution & Results The fund partnered with Luxoft to expand IT bandwidth, rationalize the existing infrastructure and increase stability Within 1 month, Luxoft provided the required skills and scale, deploying a mix of 14 on and off shore technology professionals to the job After a deep dive, Luxoft devised a plan to re-engineer the technology stack, adding needed stability while at the same time delivering new functionality Overhauled the reporting system, integrating custodian data to ABS asset lifecycle and management reporting Developed a system to manage CMBS loan data replacing a manual Excel / Access based solution and eliminating manual processes and key person risk Re-engineered the trade capture and rulesbased approval engine to comply with new investment guidelines, streamlining the approval process and reducing operational risk due to manual errors Once the build-out was complete and the need for active development was reduced, Luxoft helped the fund transition the IT support function to a low-cost strategy The fund achieved their performance objectives while at the same time controlled costs and mitigated operational risk 7

8 About Luxoft A leading technology company, Luxoft provides high-end business solutions to clients across the globe. With deep domain expertise in finance, automotive, telecom, travel and energy, we consistently go beyond our clients expectations by bringing together technology, talent, innovation, and the highest standards of quality. Luxoft has built long-lasting partnerships with Boeing, IBM, Deutsche Bank, UBS, Harman, Avaya, Alstom, Sabre, Ford, Hotwire and many others by providing preeminent business and technology professionals, and software engineers who deliver innovation tailored to the client s needs. Key Facts: Founded in 2000 Uninterrupted growth Trusted by Fortune 500 companies to build & run critical business systems Strong math & engineering roots in Eastern Europe Successful IPO on NYSE in June employees Our Clients: Contact Roman Trakhtenberg CEO, Luxoft North America +1 (212) x2406 rtrakhtenberg@luxoft.com Aaron Lipeles Managing Director, Global Head of Luxoft Markets +1 (212) alipeles@luxoft.com Luxoft USA 100 Wall Street, Suite 503 New York, NY Tel: Luxoft USA, West Coast 4400 Bohannon Drive, Suite 235 Menlo Park, CA West +1 (855) Luxoft Headquarters Bundesstrasse 5, 6300, Zug, Switzerland Luxoft UK New Broad Street House 35 New Broad Street, London EC2M 1NH, United Kingdom +44 (0)