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This page provides commentary on where things are at now and where they are likely heading in the future for the Ecosystem of CTRM functionality.
We use the term ‘NewCTRM’ to describe an idealized CTRM system of the future. Elements of our ‘NewCTRM’ may exist in some form in some vendor-supplied or open source systems of today.
Have a look at the example in the diagram below, commentary to follow.
Example of Third Party Application for CTRM
1.1) The above diagram represents a model for some software product or offering (e.g., web service) that could be created and sold as part of the CTRM Ecosystem, to be used by a firm. We’ll assume that either the firm is using software from a CTRM vendor, or maybe using their own custom-built in house software.
1.2) To interpret the information in the above diagram, we are proposing a solution be viewed as having 4 parts:
Part 1) This is the third party solution. Such as a Data Warehouse, PnL Explained, etc.
Part 2) What is labeled as ‘System Agnostic Staging Area’ is a conceptual in nature. This would from a software point of view be part of the third party solution. What this represents is getting data to a point where the format is of an industry-standard nature. To allow for data to be interchanged. This solves the intellectual property issue, since the standard format would be something openly available.
Part 3) What is labeled as ‘Adapter Layer’ would be something that goes from the ‘System Agnostic Staging Area’ to communicate with the vendor solutions. The above diagram imagines several different ‘Adapters’ in existence, i.e., 3 are shown as an example, and the example firm only using/needing the adapter to Vendor 1. Because this communicates with a CTRM system, this would need to be build out by either the CTRM vendor or by an authorized system integrator.
Part 4) This is the CTRM system, e.g., as supplied by a vendor.
1.3) The idea is that the Third Party Application is something that a CTRM system doesn’t do, or doesn’t do well.
1.4) As an example from the non-CTRM world, Microsoft Windows comes with a picture editing program called ‘Paint’ or ‘MSPaint’. It is good for light editing. And it is free, i.e., included with Windows. However, it is no competition for a third party software package such as Adobe Photoshop.
1.5) People have options. If the included MSPaint is good enough for them, they can use it, or they can use something else.
1.6) In the world of CTRM, it is hard for a firm to build out something similar, i.e., in the case that a CTRM system is missing some functionality or has some functionality that is only at the basic level. Or, rather, a firm can build out something better for one particular client. And, indeed that is the way of things where they stand now. If a firm requires more than what a CTRM package offers, they will pay to get additional functionality written for them, e.g., pay a system integrator.
1.7) The problem that we are looking to solve here is one of repetition. Suppose a system integrator does built out something new and something that they think many firms would be interested in using, they typically can’t resell it do to the various restrictions on intellectual property, etc. It should go without saying, yet we’ll say anyway, that we are in favor of the restrictions on sharing intellectual property are valid and should be respected.
1.8) So the same solution, e.g., data warehouse, PnL Explained report, risk reporting, exchange feeds, tend to be build out again and again for each new client implementation. While this is good news for the system integrators, this model can be improved upon from the point of view of CTRM-using firms.
For the diagram below, Diagram 2, we modified it to show how things would work, i.e., are proposed to work for NewCTRM. See the commentary that follows.
Example of Third Party Application with NewCTRM
2.1) The above diagram is meant to start with the previous diagram and adjust/modify it for the way we envision NewCTRM to work.
2.2) Notice it is simpler than the prior one. Just three boxes.
2.3) And why is that? The native format for the NewCTRM will be the open standards for data interchange (e.g., trades, etc.). So for NewCTRM, there will be no need for a system-specific adapter.
2.4) I.e., Third party firms can build out their applications (traditional, web service, etc.) or ‘Add-ins’ just once to the standards as indicated above in the ‘System Agnostic Staging Area’ box. This is somewhat conceptual in the sense of showing two separate boxes. The reality of the third party software is that the 2 boxes on the left are really just part of one system.
2.5) To clarify, we are not talking about things being one way or the other. Meaning, we are thinking that the third party firm would build out their application (module, web service, add-in, etc.) just once and that it would work with NewCTRM *and* traditional CTRM vendor systems. The important part is, that it would not need any special adapter to work with NewCTRM. That is how it would work naturally.
2.6) The adapters would then be created, where appropriate so that the third party app would work with the traditional CTRM vendor systems. It is envisioned that at some point in the futures, the traditional CTRM vendor systems will update to the industry standards, so as to support things with no special adapter needed.
2.7) In my mind, this is like the early days of cell phones, where each model had a different and incompatible shaped power adapter. Where in the future, everything will use ‘USB-C’.
CTRM Today For Third Party Apps
3.1) While we have been saying above ‘Add-in/Application’, the two concepts are somewhat distinct.
3.2) For an ‘Add-in’, we are thinking of something that works somewhat seamlessly within an application. E.g., something that adds a new menu item, a screen or screens, etc.
3.3) This is a common occurrence for open source software, e.g., where additional ‘add-ins’ can be added to enhance functionality.
3.4) This is something that will be part of the NewCTRM framework, which is something that may be a differentiator from traditional CTRM systems.
3.5) Not everything that has Add-in capability is necessarily open source. For example, Microsoft Excel supports third party Add-Ins.
Here is a list things that a third party company may want to offer as software/services, to supplement an existing CTRM system, or to replace some basic feature with something better.
4.1) Data Warehouse. Many firms will write their own data warehouse solution, i.e., repetition. A data warehouse would contain many days of reporting information/data, which is often not suitable to keep in a CTRM, which typically works best only handling active production data.
4.2) PnL Explained. Profit and Loss Explained reporting (a.k.a., ‘PnL Attribution’). This is something where CTRM systems may have some offering (like MSPaint) that works OK for some clients, and where others have had to historically build their own solutions to get better functionality.
4.3) Exchange feeds.
4.4) Interfaces to electronic confirmation services
4.5) Market Risk reporting. Even systems that have strengths in market risk calculation sometimes have less of a relative strength in terms of reports.
4.6) Regulatory requirement reporting, e.g., Dodd Frank, MiFID, etc. This makes for an interesting example. Why? This is something that, for sure, firms need. E.g., if a firm trades derivatives in the US, they may need to report them to a SDR (swap data repository). The requirements for regulatory reporting can change more quickly than CTRM upgrade cycles. Also, for a firm that creates ‘CTRM’ software, expertise may be strong in terms of trading and risk management, but not all vendors will be equally as strong in terms of regulatory requirements. So there may be a future opportunity for a specialist firm to create a ‘best of breed’ solution and it is our goal to help create a CTRM ‘app store’ and/or app ecosystem that will allow that to happen.
Example from Microsoft’s App Store Marketplace.
This shows a search for Salesforce. E.g., one of many add-ins available for Microsoft Outlook. This screen shot is meant to just demonstrate the idea of an ‘app store’ in general, which your humble blogger may correctly assume that you, gentle reader, are already familiar with. To help get you thinking about how this might be applied to CTRM.
Introduction to CTRM
Click on this link for a great introduction to CTRM software: Introduction to CTRM Software