Case study - 4

OTC derivatives

City Center

"The system was delivered within the industry deadline and at budgeted cost, enabling the bank to retain its license to operate in the US and continue trading."

Situation
 

In 2010, after the 2008 market crash, US federal regulation implemented a requirement for reporting all Over the Counter (OTC) derivative trades. This was to be orchestrated by a central regulator. To remain in compliance and eligible to trade in the US, all financial institutions had to meet these requirements for automated reporting.

Our client TKJ Universal , had to build a new system to integrate with this new reporting entity to meet this requirement.

How we helped

The client needed to build a system that aggregated trade reporting from multiple different existing trade capture systems, and rationalise these into a standardised report that conforms to the regulatory standards. BlackSwan consolidated the different requirements from across business streams, and drew on its integration architectural expertise to deliver a holistic, future-proof solution that supports multiple interfaces.


As these were completely new systems, both externally and internally, one of the key challenges was to adapt and keep pace with the ever-changing compliance requirements.

BlackSwan met this challenge in two ways:

  • Using an agile methodology that enabled continuous business feedback and very quick change

  • Automated testing that enabled one-click regression and allowed parallel changes to be made with confidence

The other big challenge was the intermittent availability of the third-party DTCC, which meant that external testing was not always possible. Due to the evolving requirements and constant change, the client needed to be able to test at all times.

 

BlackSwan used service virtualization to simulate the external reporting body DTCC and allow testing to continue uninterrupted.

Outcome

BlackSwan’s testing best practice and established Agile MDLC process afforded frictionless change throughout the project. BlackSwan’s integration pedigree and architectural governance expertise ensured the system delivered was to specification and future-proof to enable ongoing interoperability.

The system was delivered within the industry deadline and at budgeted cost, enabling the bank to retain its license to operate in the US and continue trading. Many banks had to quit trading OTC derivatives and were forced out of the US market due to not meeting the 2010 legislation.

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