Announced at the 40th Annual FIA Conference today, The Technancial Company (TTC) is first to market with their Eurex Clearing Prisma (Prisma) 2.05 real-time margin methodology on TTC’s JANUS™. Much of the talk at Boca this week is about the scheduled replacement - at the end of 2015 - of Eurex’s RBM (Risk-based Margining) with Prisma, the new, dynamic methodology for calculating and simulating Eurex Clearing margin requirements.
Mirko Marcadella, global head of business development at TTC, said: “The Eurex Clearing Prisma methodology has parameters that only JANUS can handle in real-time margin calculations. Eurex is encouraging vendors to move to Prisma as soon as possible and, in any event, RBM will be discontinued at the end of 2015. But Prisma is a monster compared to RBM, with more than 2GB of margin parameter files to be processed by vendors every day and 1000 scenarios, compared to 16 on RBM.” He added: “The Technancial Company is the first to support Eurex’s Prisma by offering real-time market and clearing risk management to clients now. Most risk systems on the market will not be capable of doing this, because of the impact of Prisma’s sophisticated methodology on intraday portfolio changes.”
TTC is the first, and currently only, risk management provider to offer real-time recalculation of portfolio margins across complex portfolios using Prisma. Uniquely, the JANUS™ Margin Engine is able to calculate margins according to the different exchange/clearing methodologies in microseconds and highlight the worst portfolio (the one requiring the highest capital allocation) and worst net positions.
Prisma offers a portfolio-based margin approach, which allows cross margining between products as well as across markets cleared by Eurex Clearing. This ensures that the reduced risk profile of portfolios is adequately reflected by lower initial margin requirements. The benefits of Prisma include:
- Higher capital efficiencies: more accurate risk netting effects for listed, and between listed and OTC positions.
- Greater accuracy: cross-product scenarios enable a consistent way to account for portfolio correlation and diversification effects.
- A consistent framework: consistent risk and default management process for listed and OTC products.
- More flexibility: a broader range of instruments covered with faster time-to-market.
The Technancial Company's JANUS Risk Manager and JANUS Margin Engine products are uniquely positioned to allow clearers to take advantage of real-time portfolio valuation intraday, not only on open positions (trades) but also on the total potential portfolio positions representing the 'worst case' position that may result from execution of open orders, combined with the latest open positions. JANUS filters out the "noise" of false alerts, which can occur when systems focus on old portfolios, while highlighting new risks.
End-of-day or snapshot VAR-type calculations provide limited visibility of potential risk to "what was" as opposed to "what is", and the combination of Eurex's frequent intraday adjusted parameters, with JANUS's real-time calculations ensures that the right measure of risk is applied to the latest portfolio and open order derived positions, taking the exchange's view of all market activity into account.
