Systems

The survey confirmed the view that dealing in derivatives can demand integrated
systems to ensure adequate information and operational control. It indicated that
dealers were moving toward more integrated systems, between front- and back-office
(across types of transactions).
The industry has made a huge investment in systems, and almost all large dealers
are extensive users of advanced technology. Many derivative groups have their
own research and technology teams that develop the mathematical algorithms and
systems necessary to price new transactions and to monitor their derivatives portfolios.
Many dealers consider their ability to manage the development of systems
capabilities an important source of competitive strength.
For large dealers there is a requirement that one develop systems that minimize
manual intervention as well as enhance operating efficiency and reliability, the
volume of activity, customization of transactions, number of calculations to be
performed, and overall complexity.
Systems that integrate the various tasks to be performed for derivatives are complex
Because of the rapid development of the business, even the most sophisticated
dealers and users often rely on a variety of systems, which may be difficult to integrate
in a satisfactory manner. While this situation is inevitable in many organizations, it
is not ideal and requires careful monitoring to ensure sufficient consistency to allow
reconciliation of results and aggregation of risks where required.
The survey results indicated that the largest dealers, recognizing the control risks
that separate systems pose and the expense of substantial daily reconciliations, are
making extensive investments to integrate back-office systems for derivatives with
front-office systems to derivatives as well as other management information.