Wall Street Project Management Offices Focus on Derivatives
In addition to forcing firms to reexamine their risk management controls, the recent credit derivatives meltdown has given Wall Street's project management offices (PMOs) -- the groups that zealously monitor and sometimes manage the status of IT projects -- a new focus. "A major challenge Wall Street firms are struggling with is the need to develop a derivatives platform," notes Mike McKeon, SVP at IT strategy and consulting firm Booz Allen Hamilton.
"The derivatives business has been growing significantly. Some products are fairly mature, and the technology and processes used for them have matured," McKeon continues. "But for other products, the business hasn't matured and the processes are highly manual."
While many financial services vendors hawk derivatives processing solutions, "Often [vendor] products are just a piece of the puzzle," McKeon adds. "It's a lot of integration work." This is where a PMO comes in -- to manage and lead the efforts to integrate technologies and design new processes to use the technology effectively.
At State Street, a newly formed project management office was heavily involved in the development of a derivatives processing platform that the firm currently is piloting, according to Mike Bullock, the firm's senior vice president of global product management. He notes that State Street expects to go live with the system in May.
The new platform is based on FpML -- the Financial products Markup Language, an XML message standard used by the OTC derivatives industry -- and links into DTCC's DerivSERV and Markit Partners' SwapsWire confirmation and settlements services, Bullock explains. Once a trade is fully FpML-compliant, he says, there's no need for the faxes, phone calls and e-mails that are commonly used today to settle a derivatives contract.
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