The introduction of a new Bloomberg risk platform gives traders and investors access to new levels of risk management analysis.
Algo Risk runs off Bloomberg’s order management systems and marks a significant advance on the previously fairly simple risk management tools available over Bloomberg.
Put together in collaboration with technology provider Algorithmics, it enables users to run analysis on their positions using Bloomberg’s desktop hardware and its secure private network. Gail Doolin, in Bloomberg’s business development team, says traders and investors have been increasingly demanding the same analytics as their colleagues in risk management.
One of the system’s advantages is that it is already filled with data on more than 200,000 individual securities, including government and agency bonds, corporates, high-yield and money market debt, futures, swaps and equities. This figure is set to expand as users ask for more markets and securities to be added to the system. Doolin says structured products such as CMOs and ABS deals are one area Bloomberg expects to grow strongly over the first few months, as detailed data on loan pools gets entered according to client demand.
One banker in fixed-income technology is cautiously upbeat: “Algorithmics offers a good risk management package and this system is likely to be quite attractive, in particular to the second-tier institutions that don’t have the resources or inclination to build their own.” He adds that traders are likely to be enthusiastic about Algo Risk’s easy availability and integration with the rest of Bloomberg but that managers may be more wary as many institutions on both the buy side and sell side are trying to cut costs.
By providing these services Bloomberg hopes to keep its edge in the highly competitive terminal market. It also gives Algorithmics access to front-office markets that it has so far made little progress in. The two companies have been developing the collaboration together with four beta-testing institutional partners.
Poms and Toms are Bloomberg’s existing order management systems for buy side and sell side respectively. They are already used by thousands of market participants for market data, trade capture, order management and position-keeping. And they are closely integrated with the new risk management system, which is effectively another layer of technology that the user subscribes to on top of the standard Bloomberg Professional service. This risk system runs in real time off the same live market data that fills the rest of Bloomberg, although it can also be configured to track trades made routed through other systems, such as TradeWeb.
Users can configure the risk reports they see and graph data in various ways. Modules of the system let them monitor various kinds of market risk, including their overall position’s concentration exposures to specified sectors, companies or currencies. Users can look at their value at risk either absolutely or relative to their benchmark, and at the level of whole portfolios, trading books or individual securities.
This integration lets users easily move back and forth between the two systems, monitoring a trade’s effect on their net risk and making corrections according to what the risk system tells them, if necessary. It also means they can get advanced risk management capabilities without the expense, delay and technical difficulty of integrating them with all their other systems.
The news will not be welcome to other risk technology vendors. Firms such as Sungard and Sophis aren’t likely to be celebrating Algorithmics’ success in winning a contract that could lead to its software appearing on desktops across the market.
