Galatea is involved in building many mission-critical systems for large broker-dealers. Below are some examples of what we specialize in.
Investment banks execute millions of trades each day in markets all around the world. They are almost constantly delivering and receiving securities. Accurate, real-time position keeping is essential to these firms because, without it, optimal decisions about how best to use available inventory cannot be made. A global real-time position keeper can generate millions of dollars in additional annual revenue for a broker-dealer with worldwide operations.
Position keeping is a difficult problem because of the large volume of trade and settlement activity occurring across multiple entities within an investment bank. The problem is further complicated by the fact that this activity takes place in different markets with different currencies, geographic locations, settlement cycles, and regulatory requirements. Even within a single bank, there could be disparate settlement systems that need to be accounted for.
Broker-dealers trade securities in markets all around the world. After a trade is made, a series of events take place prior to the physical transfer of securities and cash, this is known as a settlement. When payments of assets are not delivered or received, there are repercussions, which can include fines, removal from exchange trading, and disruptions to liquidity. A good settlement system generates and records settlement instructions that drive settlement activity. Knowing what is expected to settle is critical to the efficient management of inventories because it enables traders to make informed decisions on how to use available assets.
Galatea has developed a conceptual model that represents core settlement processes and we have designed and implemented a global settlement system for a major Wall Street client. In addition to its core settlement functions, this system supports numerous critical business processes that would be impossible to perform in the absence of a mature centralized approach to settlement. Our clients continue to rely on us for our settlement expertise and knowledge in the areas that leverage settlement data.
Real-time knowledge of market exposure has never been more essential to a trading desk. Not only is this knowledge required for accurate regulatory reporting, but investment bank CFOs and CROs are getting more involved in bank-wide risk management. Stricter regulations on what kind of risk is acceptable, along with rapid developments in technology and market conditions demanding complex exotic instruments, have led to a sudden increase in purifying and standardizing risk calculation and submission at investment banks. Accurate calculation of risk hinges on complete visibility of inventory, front office cash sourcing, real-time market data availability, and fundamentally sound valuation models.
Galatea is an expert in the discipline of real-time front office position keeping and cash sourcing. We also have in-house SMEs in Financial Engineering and Math. We work with our clients to ensure that their valuation models are accurate and that all data required for these models is available in a timely fashion. This, along with a delivery-focused approach, guarantees that our clients end up with a high-performance, real-time risk management system.
Wall Street broker-dealers manage an enormous inventory of securities, some of which are owned by the firm and some of which are held on behalf of clients. This inventory is a valuable asset and can be used to generate revenue. To generate revenue from available inventory, a firm may lend securities to various counter parties or use some of this inventory as collateral to borrow cash.
A number of factors govern inventory usage decisions including regulations in various markets, firm priorities, and the contractual relationship between firm and client. Broker-dealers utilize systems to optimize their decisions in order to best use available inventory.
Galatea implements custom algorithms for clients that optimize the availability of securities for lending or collateral. The solutions are flexible enough to accommodate changing regulations and to allow firm priorities to be configured by business users.