Benjamin Lucas

The partnership combines Amundi Technology’s platform for asset managers, insurers, pension funds and family offices, ALTO Investment with Murex’s OTC front-to-back solution. 

Through the use of ALTO’s portfolio management features and integrated market data, the combined offering is expected to meet evolving market demands by enabling asset managers to make informed decisions while reducing operational risks. 

Murex president, Maroun Eddé said: “Through this new agreement, Amundi Technology clients will have access to Murex’s extensive global OTC derivatives coverage, which is used daily by Amundi Group’s asset management companies around the world.  

“The integration of Murex’s market-leading OTC derivatives capabilities will support ALTO client expansion into the most complex portfolio strategies.” 

The partnership also integrates Murex’s risk platform MX.3, which aims to enhance operational efficiency and achieve more accurate assessments by providing advanced tools for managing OTC derivatives, including payoff modelling, lifecycle event management and insightful risk analytics.  

The two firms have worked together since 2007, and Amundi manages its OTC derivatives portfolios front-to-back through leveraging MX.3. 

Benjamin Lucas, chief executive of Amundi Technology said: “ALTO clients can now have the OTC processing power they need through our partnership with Murex, all in a single solution provided by Amundi Technology.  

“This is another example of how an open architecture can help investment managers to simplify their operating models by connecting market-leading solutions in a single platform.”

Read more – Migration to Murex’s MX.3 platform

Murex’s platform MX.3 has gained traction in recent years. In May 2024 Commerzbank migrated its foreign exchange, commodities, derivatives, and equities onto it. 

Similarly, expansion in May 2023 meant that MX.3 could be directly connected to the London Stock Exchange’s real time market data service, Real-Time – Optimised (RTO), when hosted on Amazon Web Services.  

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Following the expanded connectivity, Murex’s MX.3 platform can now be integrated with the London Stock Exchange Group’s (LSEG) Real-Time – Optimized (RTO) cloud-based data solution when hosted on Amazon Web Services.

This access means that Murex clients using the platform can now choose how to consume real-time market data, the pair claimed. By using the same connectivity, MX.3 have access to three deployment models that LSEG offers: RTO, Real-Time Managed Distribution Service (RTMDS), and Real-Time Distribution System (RTDS deployed).

RTO gives users access to LSEG’s real-time market data, which uses the cloud to take data from exchanges and OTC markets globally.

Real-time infrastructure is managed by LSEG and deployed in its private cloud using the RTMDS model, while RTDS deployed is managed by the client and deployed on-premises.

Alexandre Belingard, head of market data connectivity at Murex, explained that “the ability to install MX.3 and plug it easily and quickly with the Real-Time – Optimized feed on the cloud enables clients to reallocate their resources in tasks that create added value and differentiation.”

Back in September 2022, Murex integrated with ICE Data Services, which is part of Intercontinental Exchange, in order to improve access to ICE’s fixed income and derivatives data via the MX.3 platform.

Stuart Brown, group head of enterprise data solutions at LSEG, said: “MX.3 is the key front-to-back-to-risk platform for many of our customers and we are now able to power this solution through our recent data innovations. This is another great example of how an LSEG business is making real-time, historical and reference data access more open, accessible, and efficient for the financial markets.”

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What impact have rising interest rates and the cessation of US Libor had on rates desks?

Both developments have had drastic impact on trading desks and their supporting middle office risk teams, although in very different ways. For a start, the displacement of USD Libor has been a long and drawn-out process, with market participants preparing for this eventuality over the last three to four years. Many market participants are ready for the shift, but it is a global event impacting desks from the US, to Europe, Latin America to APAC. Some markets, such as the Singapore dollar markets or Thai bhat, see teams still uncertain of how to navigate this process even though we are only a few months away from the official end of the legacy USD rate. Even in regions such as the US, while it appears preparations have gone well, the act of shifting to a new rate has longer term implications from a curve analytics perspective.

In contrast, the rise in interest rates to tackle inflation has happened very quickly in the established developed financial centres, with interest rates increasing from close to zero percent or negative to over three percent in the EU and the UK, whereas it is now flirting with five percent in the US. On some level, the impact has been positive. Monetary policy changes and the impact of adjustments in key debt and rate markets, such as US Treasuries and SOFR futures, has created a more volatile market, leading to surging volumes and greater opportunity for generating trading revenues.

But there are risks, too. What has happened recently with Silicon Valley Bank is a perfect example of how rapidly rising interest affects bond prices and interest rate curves. In this example, the valuation of the bank’s fixed duration bond portfolio decreased significantly creating the conditions for the poor financial health of their balance sheet. Improper interest rate hedge proves are no longer seamless. In other institutions, trading desks have seen the rate curves become unstable.

What are the potential hurdles institutions must overcome in this current climate?

We have just exited a 10-year period of very low or negative rates. The curve was extremely flat, and rates are now climbing. We see much steeper rate curve shapes, particularly on the short end. This can be stressful in terms of how firms interpret rates or predict rates in between quoted points.

During this long period of low rates, the need to continuously invest in curve analytics was not particularly tangible. Keeping some basic curve construction techniques which worked during these past years was tempting. However, starting last year, it began to fail—it led to many diverse challenges around bogus forwards and subsequent pricing and risk challenges.

The bigger institutions did care about model validation processes that made them ready for such curve steepening scenarios. Smaller institutions and non-banks might have neglected this part and should now rapidly shift into new interpolation methods. This is where the main hurdle lies.

Murex has invested considerable effort unpacking simplistic curve assumptions and strengthening construction techniques to manage steep curves.

In what ways can adjustments to interest rate curves increase instability for trading?

These sudden series of shocks on policy rates drastically redefined the usual interest rate curves properties of the upward sloping rate curve. As a result, we now see an inverted curve with expectations that this could get steeper in the short term as the market anticipates more changes to the base interest rate in key markets, before reverting to a more typical sloping curve in the medium term. This is evidenced by looking at SOFR, EURIBOR and €STR forward curves.

The challenge for trading desks and middle office teams is that the steepened curve creates additional constraints to the resulting curve. When multiplied across numerous curves, future rate predictions are challenged, making trading unstable. Current interpolation methods have failed to provide smooth rate curves, and insufficient interpolation approaches will generate instabilities when part of the curve is highly steep and constrained.

The impact can be drastic. Some firms say their swaps prices are just wrong and not matching their sophisticated counterparts. These firms were using very basic curve construction techniques, acceptable enough to handle previous’ years situation but now becoming hazardous to accurately value their positions. In addition to this valuation perspective, simple interpolation schemes can also dangerously affect risk figures with respect to the market quote inputs, since the deformation of the curve resulting from scenarios performed on these quotes is distorted. They must observe what has worked elsewhere and implement solutions quickly to the most pressing problems.

What approach should trading desks and risk teams take to better manage the volatile rate environment?

While technology can bring the necessary tools to better adjust curves and stabilise trading, the strategy for implementing the technology is equally important. It is essential that financial institutions centralise their curve analytics internally.

A financial institution uses rate curves in most business processes. But these entities often have several curve analytics systems. Fixing everything at once and preserving consistency is a challenge.

Firms need to look at the systems and analytics architecture and choose single source of truth, to borrow a phrase from the DeFi universe. Firms need to figure out how to ensure consistency across the organisation so that whenever there is a change, they only have to change it once, creating minimal impact for the trading desk. When it comes to curves, disruption is the norm and change is the only constant.

Another aspect is model validation. The maturity of this process depends on the firm. We are helping firms think strategically about model validation. Firms should never assume things will be static. A buffer to manage the unexpected is critical. Changes always come, even in a less extreme interest rate dynamic.

How can technology help financial institutions navigate these market challenges?

Centralising curve analytics entails putting a REST API on top of the Murex rate curve module. This exposes curve analytics in a deeply simple API that any organisational system can use. Firms can minimise reconciliation costs and adapt quickly to upcoming market changes. This single source of truth can be plugged into any other system and avoids the redundancy of multiple similar programs doing the same calculation.

When it comes to model validation, whether they use an in-house or vendor system, firms must invest in the right people to understand the curve and put best practices in place. APIs are required on the tech side to retrieve historical data, and to be able to manipulate data to build belief that analytics models will be solid.

Technology must be part of a firm’s ongoing investment. It is part of being current and uncompromising on the tools used. Workarounds can solve tactical problems in the short term. But these workarounds accumulate and might eventually demand a painfully intensive upgrade. Continually and gradually upgrading tools is a better approach. In extreme market environments, such as the one we are seeing today, the workaround approach and technology set-up will be found lacking.

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The incorporation of ICE’s data into MX.3 will provide existing and potential clients with access to a wide range of daily and historical data such as cross-asset prices, volatilities and other analytics – which can be used to inform trading, risk management and profit and loss management.

ICE’s data has also been integrated by Murex into its demo environment to help demonstrate MX.3 capabilities and new business process-as-a-service solutions to its clients, based on ICE’s data.

“By creating more efficient and accelerated access to ICE’s data, we believe our clients will see benefits from having a new data source that better serves their needs,” said Frank Heanue, global head of presales central function at Murex.

“Our mutual clients also benefit from an off-the-shelf interface between MX.3 and ICE that can help improve time to market, upgradability and quality.”

According to Murex, buy- and sell-side participants can use ICE’s data to help evaluate their positions. In addition, the data can be used to run value at risk (VAR), market risk, end-of-day valuations and other calculations.

“By having an off-the-shelf interface to our data directly on the MX.3 platform, we hope to provide our mutual clients a more efficient way to access our high-quality data and integrate it into their trading and risk management strategies,” said Mark Heckert, fixed income and data services chief product officer at ICE.

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Tullett Prebon Information (TPI) has signed an agreement with Murex to provide real-time data for internal model valuation.

Murex’s clients will gain access to TPI’s end-of-day and historic datasets for foreign exchange, rates, equities and commodities.

To integrate the datasets, Murex has built a feed-handler for TPI’s FTP files to transfer the data to its clients globally.

Head of product connectivity and technology partners at Murex, Antoine Mourad, explained its clients rely on high-quality, accurate data across asset classes for trading and risk management activities.

“TPI is an established provider of OTC data. We knew it had the coverage and flexibility our clients needed. As we already share many mutual customers, it was a natural step for us to formalise a long-term collaboration,” he said.

Frank Desmond, CEO at TPI, added the partnership is an important, strategic move for the company.

He said: “It is a welcomed endorsement of the quality of our data and our ability to provide Murex, and its clients, with a consistent view.”

Earlier this month, TPI signed an agreement with Valens Research to distribute equity and credit analytics data.

The research will provide investors, creditors, risk officers and analysts with corporate performance, credit ratings, equity valuations and coverage ratios data across various industries.

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