Calypso Technology
David Little
04 January 2011
In August we reported that after 10 years David Little was leaving Rule Financial to pursue fresh challenges. Here we catch up with Little after he has had time to get his feet firmly under the table in his new role at Calypso Technology, a global financial software and services company.
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In August we reported that after 10 years David Little was leaving Rule Financial to pursue fresh challenges. Here we catch up with Little after he has had time to get his feet firmly under the table in his new role at Calypso Technology, a global financial software and services company.
Calypso Technology serves a broad spectrum of customers including sell-side financial institutions such as bank and prime brokers, buy-side firms such as asset managers, hedge funds, insurers and corporates, as well as treasury providers including exchanges, clearers and service consortiums.
SLT: Could you tell us where you fit in and what your new role is?
Little: I am responsible for developing Calypso’s business as a securities finance and collateral management product. So my role is one of strategy and business development - working with clients and prospects to understand the market and its needs and drivers and working with the product development teams to develop the product to serve those needs.
SLT: Calypso is not known for securities finance technology. Does this mean the company has a mountain to climb?
Little:Yes and no. We’ve certainly got some work to do, but we are starting from a very interesting position that gives us some significant advantages. Calypso was designed from the outset to be a cross asset front to back system including risk and finance. As such it has an extremely good data model that gives a true business representation whether you are looking from an equity stock borrow loan perspective or a fixed income repo perspective or indeed, coming from a synthetic financing direction. This is the foundation upon which everything else rests and with Calypso we are building upon a very strong foundation. Calypso already has very good back office repo and stock lending functionality. So while we certainly have some work to do, we don’t see it as a huge mountain to climb. It’s certainly an investment and one that Calypso is committed to. We see finance and collateral management taking a more and more important role in integrated trading strategies where perhaps in the past it has been more of a specialised and separate activity.
SLT: How do you see your 10 years at Rule Financial aiding you?
Little: At Rule Financial I learned a lot about partnerships and cooperation and how best to support business users. There are typically three parties involved: the client’s IT group, the professional services firm and the vendor. Each party has its role to play with strengths and insights and when they work well together they can provide the business with a very high standard of service and an ability to act rapidly and cost effectively.
I have worked for clients and consultancies and now for the first time I am getting the vendor perspective and bringing an appreciation of all three to the role. I can understand the business being frustrated with technology. Technology is simultaneously the great enabler and the Achilles heel for users. I hope to be able to take the diverse experiences I have gained and channel them to provide practical and effective solutions that can be delivered in partnership with all the other groups that are involved.
SLT: How has Calypso fared over the past few years?
Little:Calypso’s corporate profile is slightly different to other vendors in the space. Calypso is a medium-to-large sized company with over 500 employees and a single product (which is also called Calypso). We have grown consistently every year and now have a strong balance sheet with no external debt or shareholders. We are a truly international firm with offices in 13 cities covering all the major markets. That gives us a very strong focus with no distractions and an ability to invest significantly in chosen areas. As a cross asset system Calypso finds itself in many different business areas - cash and treasury products, OTC derivatives, securities, commodities and so on.
I think if you look at the evolution of products in the capital markets industry there was a strong trend where products have become ever narrower and more specialised in order to win. One of the side effects of that trend was a huge number of deployed systems with multiple versions of the truth and a need to reconcile those multiple versions at a high support cost. But that was a price that the business was prepared to pay in order to have best of breed solutions. We’re perhaps now seeing a counter trend starting with systems that have a broader scope but are every bit as capable functionally as the specialists. Calypso is perhaps the most modern of this new breed of system. I don’t see silos or specialisation ending any time soon, but I do think that there is a demand for rationalisation and for systems that can present a cross asset view with rich functionality and a single version of the truth.
SLT: Does Calypso have an opinion on the growing interest in CCPs?
Little:Nobody knows to what extent CCPs will develop in the securities finance markets, but it’s certainly clear that there’s no rush to adoption at the moment. In stark contrast, the introduction of CCPs in the OTC derivatives and swaps markets as a result of Dodd-Frank is a significant development for the industry and adoption is underway at breakneck pace with firms competing to dominate.
At Calypso we have played an important role in that process. Although Calypso was designed as a trading and risk system and was not envisaged as a central counterparty system, we found that because of the flexibility and configurability of Calypso we were able to rapidly reconfigure and deploy Calypso as the CCP engine in many central counterparties around the world. We have built upon that by providing systems for Direct Clearing Members (DCMs) and for participants who connect via DCMs. So Calypso has probably got a greater market share of the new CCP business than any other product. We have learned a great deal through that experience and one of the most complex and interesting areas is collateral management. The swaps market is huge in comparison to the securities finance markets – of the order of 100 times larger in value of outstanding trades. Not all of it will end up on CCPs, but a growing proportion will and it will have a significant impact in collateral management, providing huge opportunities for those who are best positioned to exploit them.
So even if CCPs do not encroach directly into the Securities Finance space, I think the indirect effect from changes in the way collateral is managed for OTC derivatives and swaps will have a big impact. And because we don’t know what the future direction is going to be, it makes sense to have flexible and capable systems that can react responsively to change.
SLT: Is regulation a good thing from your viewpoint?
Little:Regulation is certainly becoming a stronger driver of change throughout the markets and so to that extent it drives demand for all suppliers. But the real challenge is to trade smarter. At its best, regulation and risk management work towards creating a level and safe playing field providing the best environment for orderly trading and efficient markets. Of course, that’s not an easy thing to achieve in practice, with unintended consequences and inconsistency of regulation being constant thorns. But few would argue that strong systems with accurate, timely data and the ability to feed reliable information to all interested parties is the key to squaring the circle for all participants.
Detailed oversight, whether internal or external, is here to stay. It is no longer an option to work with inadequate systems and tactical fixes. We need strong systems that can adapt quickly when change is required whether to exploit a new opportunity or to comply with a new regulation. Calypso is such a system, fit for purpose.
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