Bengaluru headquartered information technology (IT) services major Wipro has announced a partnership with Dublin based financial risk analytics solutions provider Quaternion Risk Management to provide a Standard Initial Margin Model (SIMM)-in-a-box solution to financial institutions.
The offering will allow financial institutions covered under the Uncleared Margin Rules (UMR) to calculate trade sensitivities, generate common risk interchange format files (CRIF) and calculate initial margins in-house, a statement said.
While initial margin is the amount of collateral required to open a position with a broker, an exchange or a bank, SIMM looks to provide a common methodology to calculate the initial margin for uncleared over-the-counter derivatives.
The solution would also provide cost efficiencies and integrate seamlessly with client internal systems, while keeping sensitive trade information secure, the statement said.
Regulation around UMR came about during the financial crisis of 2008-2009, paving the way for initial rules to be set in 2009 during the G20 Summit, a forum of countries for international economic cooperation.
“SIMM calculation is a complex area with a significant role in regulatory compliance. Our compelling proposition and partnership with Quaternion promises to abstract away these challenges and let our clients focus on their core business,” Keyur Maniar, senior vice president and global head of capital markets at Wipro, said.
The solution works by simplifying compliance procedures by incorporating back testing, preparing necessary documentations and benchmarking for regulatory approvals, the statement said.
It will also offer an independent model validation of a company’s own internal SIMM solution, as well as help calculate Aggregate Average Notional Amount (AANA) and initial margin exchange thresholds.
Wipro said that SIMM-in-a-box utilises the same high grade analytics components as the world’s largest dealer banks and is built on Quaternion’s ORE XML framework, which is widely used for non-cleared derivatives trade representation.
The partnership will also help clients deploy Quaternion’s quantitative library to determine trade sensitivity for CRIF generation and SIMM calculation, the statement said.
“The combination of Quaternion’s experience building one of the industry’s most comprehensive derivative pricing libraries and Wipro's expertise in IT consulting can alleviate many of the traditional 'plumbing' and middleware headaches associated with analytics integration,” said Scott Sobolewski, Principal at Quaternion.