Fair Allocation Forex Trading and Compliance Platform

Background:

A niche foreign exchange fund operated by our client was required to conform to new trading restrictions imposed by both their executing brokers and a large proportion of their client base through revised IMAs.

These new restrictions mandated that “Fair Allocation” was required to proportion a proposed trade across a number of counterparties as well as a number of portfolios. Failing to adhere to these restrictions would mean that future investment from their client base and credit lines with counterparties would be constrained.

The client’s existing order capture system was Excel based, and after an internal review, it was decided that a more scalable, robust system was required. Due to the niche operational trading requirements of this organisation, it was deemed that an off-the-shelf product could not support these requirements. As a result, Reformis were appointed to design, implement and integrate a bespoke trading and compliance platform. In parallel, the trading life-cycle and the supporting front and middle office processes were refined to exploit the new trading platform, to give the business more agility and flexibility.

Reformis Solution

A combined Reformis and client team lead by our staff, undertook a bespoke trading platform implementation based on an agile methodology to help analyse existing front office, middle office and compliance business processes and identify any new requirements. This lead to the team suggesting more efficient processes and also helped shape the architecture of the Trading Platform.

The agile methodology worked extremely well in helping to capture very specific and complicated requirements, and refining these to a very detailed level.

The solution managed, in an automated fashion the trading life-cycle, from trade inception, through to back office reconciliation, which included:

  • “Fairly Allocating” a trade to appropriate counterparties
  • Managing any compliance restrictions imposed on the trade after running appropriate checks
  • Having the ability to override compliance warnings and report overrides to compliance
  • Managing blotter creation and any amendments
  • Providing a workflow component for Middle Office to check and approve a blotter, and generating any related counterparty notifications

As a by-product of our involvement, we were able to analyse not only the business, but also the IT operations. As a result, we were able to identify inadequate processes and through experience and best practice, make recommendations and implement a much more refined set of processes as well as technical tool sets.

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