SELL-SIDE SURVEY FINCAD Sell-Side Survey

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Frank Fletcher
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1 SELL-SIDE SURVEY 2012 FINCAD Sell-Side Survey

2 Intra-day Risk Transparent, Documented Models Easy to Use and Implement Regulatory Compliance Monte Carlo VaR Risk Assessment Regulations Foriegn Exchange CVA Porfolio Analysis Model Risk IT Spending Potential Future Exposure Credit Independent Pricing / Valuation Flexible and Scalable Accurate FINCAD Sell-Side Survey

TRADING T T MOST HEAVILY TRADED: INTEREST RATES (59%), FX (51%), AND FIXED INCOME (50%) (n = 450) TRENDING UPWARD Commodities, FX and Credit TRENDING DOWNWARD Hybrids 42% STRUCTURED PRODUCTS

3 TRADING T T MOST HEAVILY TRADED: INTEREST RATES (59%), FX (51%), AND FIXED INCOME (50%) (n = 450) TRENDING UPWARD Commodities, FX and Credit TRENDING DOWNWARD Hybrids 42% STRUCTURED PRODUCTS PORTFOLIOS Fixed Income 58% Rates 53% Foreign Exchange 44% (n = 447) ARE INVOLVED WITH STRUCTURED PRODUCTS In a structured products portfolio, fixed income is still the most popular asset class, followed by rates. Slight increase in credit, commodities and FX compared to last year s survey. Equities Credit Commodities Hybrids 37% 36% 27% 5% (n = 186) FINCAD Sell-Side Survey

4 More than 2/3 use a 3rd Party Analytics Library 3rd Party Analytics are playing a significant role. 67% of respondents reported using an external library as their primary derivatives analytics tool either alone or in combination with their in-house system. What s important in an external library? Making sure it s easy to use and implement (77%), has transparent, documented models (76%), and is flexible scalable (74%). (n = 250) FINCAD Sell-Side Survey

BIGGEST CHALLENGE Accurate Risk Assessment Regulatory Compliance Independent Pricing / Valuation While Accurate Risk Assessment (22%) was seen as the biggest challenge, this was followed closely by

5 BIGGEST CHALLENGE Accurate Risk Assessment Regulatory Compliance Independent Pricing / Valuation While Accurate Risk Assessment (22%) was seen as the biggest challenge, this was followed closely by Regulatory Compliance (21%) and Independent Pricing/Valuation (19%). 22% 21% 19% 12% 10% 6% 6% 6% ACCURATE RISK ASSESSMENT (n = 369) REGULATORY COMPLIANCE INDEPENDENT PRICING/VALUATION Flexibility to offer a more diverse range of products Ability to perform portfolio analysis Achieving transparency in financial reporting Intra-day risk reporting Other FINCAD Sell-Side Survey

6 Knowing The Risk KEY WAYS OF ADJUSTING RISK STRATEGY: Stress testing and scenario analysis (48%) edged out greater analysis and awareness of model risk (47%) as the key ways of adjusting their risk strategy. (n = 400) Knowing their risk in real time was important for more than half of the respondents. 61% need to know the risk of their portfolio on-demand or intra day. T T TRENDING DOWNWARD Model risk analysis (47% in 2012 versus 55% in 2010) TRENDING UPWARD Implementation of independent valuation methods (42% in 2012 versus 32% in 2010) Monte Carlo VaR (34%) topped the list as most important type of risk analysis used, followed by CVA (20%). Monte Carlo VaR Credit Value Adjustment None Potential Future Exposure Other Potential Future Exposure 34% 20% 16% 15% 9% 8% FINCAD Sell-Side Survey

egulations 68% anticipated a major or moderate impact on their business As regulations take shape, 68% expect there will be a major or moderate impact on their business this is an increase over

7 egulations 68% anticipated a major or moderate impact on their business As regulations take shape, 68% expect there will be a major or moderate impact on their business this is an increase over results from prior years (57% in 2011 and 2010 surveys). The upward trend seems to be fueled by the anticipation that regulations will have a major impact and will require significant changes in order to accommodate them (26% in 2012 versus 20% in 2011 and 16% in 2010). FINCAD Sell-Side Survey

8 Spending More on IT THREE I N F O U R EXPECT IT SPENDING TO INCREASE In the 2012 survey, 75% expected their IT spending to increase this year. This is a decline compared to surveys in the prior years (87% in 2011 and 86% in 2010). (n = 367) FINCAD Sell-Side Survey

The survey took place between January 17 to February 10, 2012. OTHER 14.7% 15.

9 METHODOLOGY FINCAD conducted an online survey of finance professionals from sell-side firms around the world. The survey took place between January 17 to February 10, OTHER 14.7% 15.8% REGIONAL BANK BROKER-DEALER 7.1% 5.3% PRIVATE BANK 21.2% INVESTMENT BANK COMMERCIAL BANK 35.9% (n = 476) FINCAD Sell-Side Survey

10 ABOUT FINCAD Founded in 1990, FINCAD provides advanced modelling solutions built on awardwinning, patent pending technology. With more than 4,000 clients in over 80 countries around the world, FINCAD is the leading provider of financial analytics technology, enabling global market participants to make informed hedging and investment decisions. FINCAD provides software and services supporting the valuation, reporting and risk management of derivatives and fixed income portfolios to banks, corporate treasuries, hedge funds, asset management firms, audit firms, and governments. FINCAD Analytics can be accessed through Excel, MATLAB, as a Software-as-a-Service or embedded into an existing system through software development kits. Now, over 70 FINCAD Alliance Partners embed FINCAD Analytics within their solutions. FINCAD provides sales and client services from Dublin, Ireland, and Vancouver, Canada. The Future of Financial Analytics Corporate Headquarters Central City, Suite nd Avenue Surrey, BC, V3T 5X3 Canada EMEA & Sales Client Service Center Block 4, Blackrock Business Park Carysfort Avenue, Blackrock Co Dublin, Ireland USA / Canada Europe London Dublin Elsewhere Fax info@fincad.com Copyright 2012 FinancialCAD Corporation. All rights reserved. FinancialCAD and FINCAD are registered trademarks of FinancialCAD Corporation. Other trademarks are the property of their respective holders. This is for informational purposes only. FINCAD MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, IN THIS SUMMARY. XXA12W084-1

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