It’s a little known fact that any time there is a trade break at any of our clients using K3, I get an alert email. When we configure the email alerts I ask clients to put me on the distribution list for any trades received from the exchange in K3 but not able to book in the ETRM system. It just helps me supervise any troubleshooting and making sure any problems are headed off at the pass.
So with the changes on ICE, I was expecting a pretty busy morning. And then…..Nothing.
K3 Customers Made the Transition in a Couple of Hours
At the risk of bragging, I’m happy to say that K3 clients weren’t slaving away this weekend. Unlike approaches that use trade templates or hard-coded mappings, with K3 the update process was simple. Our clients made the update without changing any code, doing painful technology manual labor, requiring code freezes or distracting skilled developers from other projects.
They simply opened the K3 GUI and exported affected mappings to Excel. They then replaced affected values from the ICE spreadsheets and pasted the updated mappings back into K3. Done.
If anything was time consuming, it was getting into the ICE Test environment and booking deals to ensure all was flowing correctly. All in all, the process took a couple hours end-to-end and I’m proud to say that most of them did it without even having to ask for help.
Ok, I am bragging. But if anything it’s because I’m really proud of our people and how they work smart. I know a lot of folks spent their weekend (probably a lot of weekends) altering internal systems. And I’ve been there, but it just does not have to be that way.
Oh yeah, and some guy jumped from 128,000 feet this weekend. Wow.
CFTC sent back home to do its homework. The District Court tossed the position limits ruling. Don’t get me wrong. I really feel for the gauntlet that the CFTC has been put through in terms of getting out new rules. But the District Court found that the organic legislation did not give the CFTC the authority to establish limits without finding that the rule is “necessary and appropriate.” In other words, “Go back and do more homework.”
“U.S. District Judge Robert Wilkins in Washington today ruled that the 2010 Dodd-Frank Act is unclear as to whether the agency was ordered by Congress to cap the number of contracts a trader can have in oil, natural gas and other commodities without first assessing whether the rule was necessary and appropriate.”
DTCC got some good news this week with the preliminary approval of the for interest rate, credit, foreign exchange and equity asset classes.
Suspiciously missing from this is DTCC’s GTR (Global Trade Repository). GTR is where the “other commodities classes” are supposed to go.
This means that, as of this writing, there is only one approved Commodities SDR for a January “Go Live:” ICE’s Trade Vault.
Current Status is as follows:
DTCC Data Repository (for IR, Credit, FX, an Equity): Preliminary Approval
DTCC Global Trade Repository (for Commodities): Not Approved
CME: Not Approved
Reveal Tools SDR: Not Approved
Here is the challenge. Investment Banks that are swaps dealers have pretty much, across the board, decided to use DTCC as the default SDR. This is fine, except that the DTCC GTR for commodities has not been approved yet. They filed in November but it is a bit of a come bet at this point as to whether it is going to be ready and approved by Jan.
We’ve been very busy of late as we have off the shelf connections to DTCC and Trade Vault. Happy to chat with anyone having challenges in this area.
Last week ICE announced that it is registering its products as Futures.
ICE has always traded “look alike” swaps that acted and behaved just like futures. As look-alike contracts, ICE was able to stay out of the Commodity Exchange Act and the CFTC. Dodd Frank changed all of that. So ICE seems to have adopted a “join ‘em” attitude and decided to go head to head with CME.
Back to Futures!
It’s worth pointing out that there is still a HUGE incentive to trade bilaterally OTC. If you are Exxon, the amount of collateral you have to put up for an OTC trade is minimal if not zero. So why would you clear and post margin? Uncleared OTC is going to remain alive and kicking. Sure, some trades will be mandated for clearing. But for now those contracts are few and as new products come into scope they will be battled over furiously.
In this sense, ICE really has an edge. ICE has a great OTC platform that will stay live; an SDR that appears functional; and, a wide futures product mix. CME may tout Clearport as the ultimate OTC clearing destination, but as many know, it’s just far, far harder to use than clearing on ICE. I was talking to a broker who told me that ICE calls him every week to make sure everything is running smooth as silk. CME? No comment.
While I am pretty bullish on ICE with this move, it is not without some anticipated growing pains. I think the worst pain is going to be in their pricing and margin groups. Pricing was a revenue center for ICE. So if you are anyone but a high volume trader, getting prices and margin cooperation has historically been a bit like a trip to the dentist (you pay for pain). I think this is changing. After all, its a federal requirement that futures settlement prices get published daily.
But these are trivialities. For those trading on ICE, there is really not much impact. Had ICE stayed with look-alikes, they would have had to send all these trades to Trade Vault as a DCO anyway.
The day has finally come. We’ve been under a news embargo for about a month, but K3 has been selected as a finalist at Tech Crunch Disrupt, a conference of new technology applications that are ‘disruptive’ to the current state. We have matured from a focus on Energy Trading to Trading as a whole to the technology mainstream. Bring on the world!
It’s interesting being one of the only enterprise applications in a room full of ‘apps’. In a day where our attention span is limited to 140 character and organized around hashtags (#), how do you convey the complex functional footprint of an enterprise application in 6 minutes? That was the challenge of the Startup Battlefield. Present to a room of 2000 venture capitalists, technologists and press and capture their imagination around how your application will transform an industry. Safe to say, our man Gordon Allott nailed it (click for full video and writeup).
As much as we have been demonstrating the functional power of K3, the organizational transformation it causes is the story that speaks to people. If you work in IT or Operations for a large trading firm or bank, you know how painful it is to keep your systems interfaces up to speed with your business. It’s a maintenance nightmare, and it reduces the job descriptions of smart people down to data cleanup activities. With K3, companies can efficiently build and manage systems interfaces, which is a functional and cost transformation; but the experiential transformation is for the people working at these institutions. No longer do IT and Operations need to clash around maintaining things like mappings and rules to move data between systems. IT gets open source components to build the interfaces and then Operations can use K3′s simple GUI to maintain them.
Sound easy? Good, because it is. Email us for details on how your Developers and Operations people can start loving their jobs again.
BroadPeak Partners today released the first version of its Exchange Fills Aggregation component for K3.
“It’s one of the most irritating problems for trading management. A trader might put out an order for 100 Lots and get 6 fills. So what was once a simple trade has now become 6 trades in the ETRM system,” said Gordon Allott, BroadPeak’s President. “We developed a component for our rules engine that re-aggregates fills before booking into the ETRM system. As always we are focused on referential integrity so traders have access to both the original fills and the end aggregated trades.”
The development of the Fills Aggregator allows traders to more easily view trades as they posted them as opposed to how they are executed on the market. Likewise it eliminates the ETRM system from additional calculation overhead, shortening the end of day process. Aggregation is now a standard component in the K3 F1 Suite.