SocGen Bolsters Rates Business with Quartet’s ActivePivot

It's been nearly five years since Quartet Financial Systems initially began implementing its in-memory aggregation engine, ActivePivot, into Societe Generale's rates business, but the French bank is still seeing the benefits of the analytics tool.

It started, Jérôme Cazes, global head of IT for the front office of global banking and investor solutions at SocGen, tells WatersTechnology, due to a couple of factors occurring at the same time.

Around 2010, a growth in the fixed-income space was coupled with the passing of the Dodd-Frank Act, making banks' day-to-day operations more difficult due to rising regulations. At the same time, there was an initiative at SocGen to grow the fixed-income business.

"In order to master our risk and our P&L, we needed a tool which could address that increase of volume and at the same time the complexity of the product," Cazes says. "We needed a tool to accompany us in our growth and better manage our real-time risk."

Enter Quartet's ActivePivot, winner of of the best sell-side product of the year and best sell-side analytics provider awards at this year's Sell-Side Technology Awards. The analytics tool provides aggregated risk measures that are constantly refreshed on the fly to give traders real-time visibility of their risk. ActivePivot uses 250 measures based on market and risk data, which are refreshed in real-time. Traders are able to visualize and analyze their risk and P&L across 200 dimensions.

Risk measures can be viewed by traders from a macro (desk rate risk in the US) or micro (rate risk in USD by book) level. 

ActivePivot, which is a component technology that is integrated into a wider risk-management system, was first implemented at SocGen at the end of 2010 over a five-month period, starting with a proof of concept with derivatives rates.

"The combination of performance, scalability, volume and real-time pushed us to choose a tool such as ActivePivot," Cazes says.

Further Growth

The implementations didn't stop there. P&L calculations for all of SocGen's derivatives rates products were eventually centralized through ActivePivot. The point of the move was to be able to have accurate P&L figures at any point during the day. As the market data shifted, so too did the P&L views.

SocGen's New York trading desk was the first to integrate around 2013 due to liquidity in the US markets at the time, according to Cazes. The thought was if it would work in the US it would work elsewhere.

Once the implementation of rates was global, a similar move was made for credit and foreign exchange (FX) options desks at the end of 2014 and beginning of 2015.

"The margins in the fixed income industry are going down, so there is a push for us to better manage our risks," Cazes says. "We partnered with Quartet for a risk and analytics type of function, and we moved to a detailed P&L and real-time P&L. That proves how effective we think the tool is."

More Improvements

Georges Bory, co-founder of Quartet, says the vendor releases an update for ActivePivot every four months and a major upgrade every two to three years.

An upcoming feature that will be released for ActivePivot is around what-if simulations. Bory says in the next release traders will be able to simulate any type of situation, similar to what one would do if they were using a spreadsheet.

The benefit, however, comes in the fact that with ActivePivot it is easily shared. Users can change part of the data, flag it as a what-if scenario and share it with someone else who can also edit it.

One of the most recent upgrades is a time machine feature, similar to what can be found on Apple's MacBook computers. The enhancement allows traders to go back in time and look at their position at any time during the day.

"ActivePivot's new time machine feature is very powerful because you can move from a snaphsot view to a complete movie", Bory says. "Sometimes when you see how numbers have changed you understand better what is the root cause of the issue."

The Bottom Line

· SocGen implemented Quartet's ActivePivot into its risk-management system for its rates derivatives business.

· The French Bank also centralized all of its P&L calculations for its derivatives rates products through ActivePivot.

· An upcoming release of ActivePivot will allow users to share and edit what-if scenarios.