SocGen Ups Derivative System
Software replaces proprietary and third-party systems
May 18, 2009
Societe Generale Securities Services has added software at its Paris headquarters that will improve the monitoring and valuation of over-the-counter derivative trades for its growing outsourcing business.
The custody and securities processing arm of French investment bank Societe Generale has installed Misys plc's Summit FT suite of front-, middle- and back-office software for OTC contracts, as well as hybrid and structured products. The software performs an array of booking, collateral management, pricing and settlement functions.
Summit FT replaces a combination of proprietary and third-party systems--and plenty of paper-based work that increased the potential for errors. Launched in 2005, the bank's outsourcing business for OTC derivative and other contracts handles post-trade processing functions for asset management firms, hedge funds and other buy-side customers.
The implementation of the Misys software is part of SGSS's overall strategy to distance itself from a well-publicized trading scandal of its parent bank last year, where a single trader allegedly engaged in unauthorized trades running into tens of billions of dollars. SGSS had no involvement in that alleged fraud, which cost the parent an estimated $6.7 billion, when it was forced to close the trader's positions over three days.
Last July, SGSS underwent a major organizational overhaul creating a global information technology organization led by chief information officer Jean-Michel Leclerq and a back-office unit led by Jean Cadroy, head of central hub operations. The two executives work directly with the heads of seven SGSS business lines--clearing, custody and trustee, retail custody, fund administration, fund distribution, liquidity management and global issuer services to ensure quicker time to market for new services.
"Our OTC derivatives outsourcing service is one of the few solutions in the market for firms that want to take a modular approach to the OTC derivatives component of their middle and back office," says Serge Jacqueline, head of fund administration and asset servicing for SGSS which has $3.7 trillion in assets under custody. "Unifying our middle- and back-office platforms with Misys Summit FT will create real-time processing in the business with much broader collateral tracking and valuation, helping us create strong returns for clients."
The multitude of custody platforms the bank previously used did little to mitigate risks and hindered business development, SGSS officials acknowledge. Making matters worse, trade confirmations were handled by hand. About 100 staffers were spending too much time rekeying information from one system to another or using Excel spreadsheets to keep track. The new software makes it easier to see changes in positions as trades are executed and whether a proper margin is being maintained.
"The systems could not cope with OTC derivatives properly and much of the work was still being done manually," said Philippe Rozental, head of asset servicing for SGSS. "We needed better workflow tools, a consolidated view of the client's holdings and automated collateral management capabilities."
With the installation of Misys' software, SGSS derivatives unit has focused on exceptions processing work and seen its client base grow from only a few firms to about 40 asset managers, hedge funds and broker-dealers. Seven also rely on the bank for custody services.
The Summit FT solutions are integrated with SGSS' market data software tool TimeScape, licensed from London's Xenomorph in November 2007. This produces a "golden copy" of end-of-day prices from 15 different information suppliers. The unit also processes information related to 70 different currencies and 5,000 volatility surfaces, which give three-dimensional views of how much and fast a security can move up or down. With Summit's product, each surface can include between 200 and 500 data points.
