Case Study

Genesis Repo Trading Desk

Overview

A leading Repo Desk needed a management solution to support its rapidly expanding Repo activities and to provide real-time inventory and exposure information. The bank chose the Genesis System, by EXIS Consulting, as the foundation for building its solution.

The Company

As an early player in trading emerging markets debt, the bank has built up inventories which could be made available for Repo to provide additional profitability via interest income. The front office has also begun to extend its Repo desk to provide private banking clients the ability to buy and sell bonds on margin. The repo desk is responsible for providing five day inventory projections, exposure projections, and total financed outstanding. The operations group supports the desk by generating confirmations, matching and clearing the trades.

The Problem

The firm-wide proprietary trading system was not tightly integrated with the bank’s Repo solution. Daily inventory balances were imported into the firm’s main-frame system on a batch basis each night which limits management to viewing last nights closing position only. Inventory and Exposure Ladders were not available in the firm’s current Repo solution and reporting was limited and unspecific to the debt trading business. Emerging market securities have irregular capitalizations and amortizations that were not modeled in the firm’s plain-vanilla fixed income system.

The Repo desk required a solution that could accurately report the cash desk inventories in real-time and provide full inventory ladder and exposure reporting. The system would need to consolidate trade date positions with settlement inventory and allow end users to monitor breaks and margin calls.

The Solution

EXIS Consulting was selected to deliver the Genesis System as the core application to manage the emerging market trading and Repo activities. Inventories are presented in real-time and trade tickets are easy to input while allowing for nuances such as hair-cutting principal and interest separately and allowing for cross-currency lending.

The Results

The repo desk can effectively manage inventories, generate interest income, and reduce funding needs based on real-time inventory ladders and projections. Repo opportunities can be easily identified with online position, settlement inventory and margining views. Sophisticated and comprehensive reporting help support the desk and ensures management a greater control over their business.

The Benefits of Genesis Repo Desk Manager

Objective	Benefits Achieved
Display Asset Inventory Ladders for Repo and Cash positions in real-time	The Genesis complete solution allows proprietary trading positions to be combined with Repo positions to show total inventory in real-time
Provide management with Counterparty Margin Ladders for Financing, Collateral, Borrowed, Lent, and Exposure	Aggregated Counterparty positions detail each Counterparty’s individual positions and parent position across the various measurements
Rollover Repos quickly and easily	Users have an easy tool to take the current trade, add a new return date, and instantly create a new trade to extend the contract
Allow collateral currency to differ from loan currency on Repo	Genesis fully supports cross-currency repos and allows multiple pieces of collateral to be pledged under one Repo
Automated Mark to Market to monitor margin calls	Margin calculations are updated in real-time during MTM to revalue the collateral and exposure ladders
Track margin calls and collateral pledged	Trade tickets for margin calls are linked to the parent Repo and can either accrue interest or be used to reduce the finance amount. Online views display the immediate impact on exposure
Capture negative interest rates on financing	The Genesis trade ticket will allows users to capture negative financing rates in cases where very illiquid paper is being repoed
Link multiple Repo trades to one underlying reference rate for pricing	During trade capture users can flag a trade as linked to a reference rate. Reference rates can be updated daily and each linked Repo will be re-rated accordingly
Allow private banking clients ability to buy and sell on margin	The Genesis leveraged lending ticket supports comprehensive margin financing trade capture and associated finance reporting
Provide ticklers for upcoming settlement events	Settlement Ladders, Rollover Ladders, and Position Ladders detail the net position returning or rolling over the next four business days
Offer single application for Repo Traders and Cash Traders	One unified application means both groups can view position and net inventory information in real-time
Provide comprehensive End of Day reporting	Asset Inventory, Cash Management, Rollover and Settlement Ladders can be batched together and run on daily timer. Any requested reports are stored internally within the system for later recall and review
Provide data feeds for downstream risk or compliance systems	Genesis exports user-defined trade, position and inventory data, in multiple formats, for downstream firm-wide systems