Accelerate FRTB (Fundamental Review of Trading Book) Compliance

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A flexible solution running on AWS cloud leveraging Confluent streaming data pipeline to support regulatory and market risk requirements

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Overview

Banks are facing many challenges in many Jurisdictions as the go-live date for FRTB is approaching. The new regulation is expected to increase the market risk capital requirement between 20% and 30%, negatively impacting bank profitability.

Banks can use one of the two available approaches in implementing FRTB: The Standardized Approach (SA) and the Internal Model Approach (IMA). According to BCBS estimates, IMA is expected to reduce the market risk capital requirement between 9% to 55% (w.r.t. SA). So, there are many economic reasons to implement IMA. Yet, IMA has a high computational requirement and implementation cost. The compute and data requirements are estimated to increase by around nine folds. In addition, IMA is subject to back testing which further increases the challenge.

Many banks’ legacy systems are designed to be horizontally scalable but did not foresee the need to scale to these levels. Therefore, moving to a next-generation risk platform with lower costs per calculation becomes the logical next step.

Ness’ unique positioning help banks to implement IMA through our Risk on Cloud with Streaming (ROCS) solution. We have successfully helped clients move to next-generation risk platforms to meet new regulatory demands like FRTB.

Approach

Risk On Cloud with Streaming (ROCS) for FRTB

Risk On Cloud with Streaming for FRTB is a data-first modernization approach that avoids a “Big Bang” and leverages streaming architectures on the cloud to produce near-real-time calculations and visualizations. Successful Re-orchestration projects require a modern approach to building infrastructure, detailed business domain knowledge to extract business logic, and a deep understanding of legacy technologies.

ROCS for FRTB on AWS simplifies the transformation of Risk, Pricing, and Valuation Architectures from EOD batch to streaming using re-orchestration.

  • 100% Cloud-based: Leverage the AWS ecosystem to deliver a secure, scalable, and dependable risk platform.

  • Analytics Agnostic: Provide flexibility to choose your analytics and market data provider or mix and match.

  • Streaming Enabled: Connect real-time data feeds (Trade, Market, Reference) to the Cloud for processing, distribution, and monitoring.

  • Risk Factory Accelerator: AWS Marketplace offering that automatically stands up the risk infrastructure with the ability to run sample trading and risk apps.

  • Structured 3-phase Engagement: Follows AWS’ Migration Acceleration Program (MAP) – Assess, Mobilize, and Migrate

Business Outcomes

  • Potential decrease in market risk capital requirement and increase in revenue opportunities

  • The benefit of switching to IMA outweighs the cost of reorchestrating the risk system

  • Quicker time to market for future regulatory and business requirements
  • Cost-effective scaling of compute to support periodic large-scale backtesting

  • Accelerated development of new methodologies, analytics, and products

  • Ease of benchmarking and migration of analytical libraries, proprietary or 3rd party

  • Single streaming architecture for multiple risk use cases, Real-Time, End-Of-Day, On-Demand

  • Production quality environments increase the reliability of testing and model calibrations

  • Pro-active operational intelligence ensuring stability and dependability of risk computation

Why deploy ROCS for FRTB on AWS + Confluent?

  • ROCS for FRTB on AWS simplifies the transformation of Risk, Pricing, and Valuation Architectures from EOD batch to streaming using re-orchestration.

  • The ability to scale compute resources across Amazon Elastic Compute Cloud (Amazon EC2) instances provides Risk Managers, Portfolio Managers, and Quants to perform ad-hoc what-if scenario analysis.

  • In addition, the analysis helps respond to significant market events requiring real-time re-calculation of portfolio exposures.

  • ROCS for FRTB on AWS can help business decision-makers visualize, analyze, and investigate P&L and risk sensitivities across multiple dimensions providing reliable intra-day reporting for your trading desk.

  • ROCS for FRTB provides a single streaming architecture for multiple risk use cases. Confluent is the industry’s leading streaming platform.

  • Confluent Cloud is available on AWS Marketplace to fit seamlessly into ROCS for FRTB.

  • Confluent Cloud provides a Service Level Agreement that aligns with Mission Critical systems.

Our Work in Action

Case Studies

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DTCC – FRTB data service to optimize Balance Sheet Capital
Ness provided a scalable SaaS platform on AWS for real-price observations of derivatives and cash instruments. ​
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OCC – Modernizes their Risk and Margining Platform leveraging Streaming Architecture on the Cloud to provide increased transparency
The client selected Ness to help rebuild its market risk and margining platform leveraging Streaming Architecture on the Cloud to provide an environment for intra-day risk management, intra-day computations, pricing, and re-valuation.
Read more

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See all case studies

Our Work in Action

Case Studies

left-arrow
DTCC – FRTB data service to optimize Balance Sheet Capital
Ness provided a scalable SaaS platform on AWS for real-price observations of derivatives and cash instruments. ​
Read more

X
OCC – Modernizes their Risk and Margining Platform leveraging Streaming Architecture on the Cloud to provide increased transparency
The client selected Ness to help rebuild its market risk and margining platform leveraging Streaming Architecture on the Cloud to provide an environment for intra-day risk management, intra-day computations, pricing, and re-valuation.
Read more

X
right-arrow
See all case studies

Insights

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Solution Brief
FRTB: Risk On Cloud with Streaming (ROCS)
How Ness can help banks implement IMA through our Risk On Cloud with Streaming (ROCS) solution
Read more

X
eBook
Accelerate FRTB Compliance based on ROCS
How Ness can help banks move to next-generation risk platforms to meet new regulatory demands like FRTB
Read more

X
Blog
FRTB (Part 1): FRTB Explained
How banks can implement one of the two methodologies: SA or IMA to comply with FRTB
Read more

X
Blog
FRTB (Part 2): Why we need Next-Generation Risk Platforms
Limitations around legacy risk platforms and how they can meet the calculation demands of IMA cost-effectively.
Read more

X
right-arrow

Insights

left-arrow
Solution Brief
FRTB: Risk On Cloud with Streaming (ROCS)
How Ness can help banks implement IMA through our Risk On Cloud with Streaming (ROCS) solution
Read more

X
eBook
Accelerate FRTB Compliance based on ROCS
How Ness can help banks move to next-generation risk platforms to meet new regulatory demands like FRTB
Read more

X
Blog
FRTB (Part 1): FRTB Explained
How banks can implement one of the two methodologies: SA or IMA to comply with FRTB
Read more

X
Blog
FRTB (Part 2): Why we need Next-Generation Risk Platforms
Limitations around legacy risk platforms and how they can meet the calculation demands of IMA cost-effectively.
Read more

X
right-arrow

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