Over the last two decades there have been significant limitations in the way that technology to manage swaps processing has been deployed to hedge funds.
Over the last two decades there have been significant limitations in the way that technology to manage swaps processing has been deployed to hedge funds. PrimeOne Solutions is attempting to change that with SwapOne: a sixth generation global swaps lifecycle engine. By offering this bank-proven industrial solution, the aim is to help increase the level of efficiency in managing swaps not only at hedge funds but in the marketplace as a whole.
“This is a shift in mindset where hedge funds can have ownership of their own financing and P&L calculations on swaps rather than having to rely purely on their counterparties,” explains EJ Liotta (pictured), Global Head of PrimeOne Solutions.
Today’s swaps marketplace is highly fragmented and inefficient. Over the years, the way swaps are traded has seen a lot of customisation, particularly at the banks where an entire ecosystem of different systems has emerged.
“It’s about putting the power of the technology in relation to swaps processing in the hands of hedge funds and helping them become a little less reliant on the banks to handle their swap lifecycle calculations,” says Chris Chanod, Global Head of Business Development, PrimeOne Solutions, part of CoreOne Technologies.
For hedge funds that might be trading swaps with multiple bank counterparties, monitoring the lifecycle of those swaps becomes a complex endeavour.
“The trick is to ensure that you accurately account for cash flows coming out of the back of the swap in an efficient, accurate way. That’s precisely what our SwapOne software does. Our goal is to continue to deploy our software at hedge funds so that they become much more interconnected with banks. That’s the bottom line,” says Liotta.
“What we’ve done is to level the playing field where banks and hedge funds have the same power and capability in their hands. Our strategic vision is to form a network of swaps counterparties using advanced technology that can facilitate greater efficiency and accuracy.”
In other words, SwapOne is an attempt to create order out of chaos and establish a unified framework within the swaps industry.
“In the past, and in many cases still today, hedge funds have attempted to replicate the financing and equity calculations of their swap positions and transactions, as performed by their bank counterparties. Without true built-for-purpose swaps processing technology, they have typically done this by utilising equity OMS systems or traditional fund accounting systems to do complex portfolio swap calculations. However, those systems were not built to do that,” states Chanod.
A swap is an amalgamation of information that needs to be derived from an OMS, an accounting system, a payment system and so on.
“What has been missing in the industry, thus far, has been the glue to tie all that together. That’s essentially what SwapOne does. We are trying to create critical mass with respect to the user base. The aim is to amalgamate everything into a network of counterparties all running off the SwapOne software,” confirms Liotta.
Whilst entirely cognisant of the fact that establishing a similar platform for unified swaps processing will take time, Liotta is confident that SwapOne has the potential to revolutionise the swaps marketplace.
“We think to get to critical mass it’ll take 18 to 24 months, after which we will focus on developing the network aspect of the SwapOne programme,” concludes Liotta.
