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    Collateral management enhancements with Calypso


    A large North American Investment house must enhance their current collateral management capabilities to meet the scope and complexity of the products included within their Investment Frontier roadmap as well as pending collateral management regulatory obligations. Decision was made to move from their current system to Calypso V16, which would provide them all the functionality they lacked in the current system. First Derivative was hired to partner with the client on their migration and decommission of the legacy system in multiple phases.

    Current Environment

    • 36 UDA’s (User Defined Applications) and more than 200 manual processes.
    • Average 12,000 Collateral movements in a month
    • No connectivity to industry utilities or Swift messaging
    • No MTM calculations (acctg based pricing)
    • No initial margin regulatory capabilities

    What we did

    We assembled a team of 7 resources which included 4 Business analysts/ SME’s and 3 UAT testers over a period of 18 months. We started with a “Blueprint” phase to better ascertain the business requirements. This took the form of workshops over a number of days where the client’s project squads and business users outlined their current state, and where the First Derivative and Calypso Team provided oversight of the Calypso solution. This yielded an overall project broken into 3 phases. Phase 1 included OTC and MSFTA products.

    Phase 1

    • Number of Funds: OTC (300), MSFTA (260)
    • Number of Brokers : OTC (24), MSFTA (13)
    • Custodians: OTC (5), MSFTA (6)
    • Ops users: 8


    • Re-defined existing Funds and Subfunds’ structure used on Repo line of business to be aligned with collateral Mgt requirements
    • Migrated Margin Call Agreements from legacy system to Calypso (VM Margin Call agreements, VM and Independent amount Margin Call agreements, Independent Amount Margin Call Agreements)
    • Settlement of collateral via Segregated Accounts SDIs (FBO accounts) and Non Segregated Accounts SDIs model (Direct Settlement)
    • Swift message generation (MT20X, MT54X, MT91X, MT90X) – Legacy system did not have Swift connectivity and business manually communicated and monitored all settlements with custodians
    • Business process workflows enhancement
    • Interest bearing calculation and settlement (cash Collateral only)
    • Corporate Actions generation on Security Collateral (Interest, Principal and Interest, Paydown, Redemption…)
    • Acadia integration
    • Market Data Interfaces Enhancement
    • Security inventory management for collateral
    • Reports and Statements (downstream and upstream)
    • Pricing (core calypso pricing measures and external pricing using PLMarks)
    • Reconciliations (custodian Reconciliations…..)
    • Automated testing via CATT


    1. Elimination of 30 UDA’s
    2. 60% of manual processes exception based
    3. Margin Calculation – Derivatives MTM calculations
    4. Regulatory Initial Margin – SIMM and Grid IM calculations, Regulatory IM Monitoring
    5. Margin Workflow – Acadiasoft margin messaging, STP Margin Rules
    6. Inventory Management – Collateral Optimization and Automated Escrow
    7. Settlement – Swift integration, Systematic Settlement monitoring
    8. Reconciliation – Automated, Exception based
    9. Reporting – Automated Distribution, Centralized subject Area