SaaS Collateral Management Technology Saving time, reducing risk, coping with regulation

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SaaS Collateral Management Technology

Saving time, reducing risk, coping with regulation

• Who are CloudMargin

• The Opportunity

• The Business Case

• Appendices

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6

11

17

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Ex

is

ting

L

ink

s

to

:

Collateral

Agreements

 

on the platform

4 Industry

_Awards

3 Official

_Partners

Staff

13 Solution

1 Projected Sales 2016

Recurring Revenue 2015

$350K

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6 Market Utilities

Trade Repositories

Clearing Brokers

A CloudMargin Overview

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Steven Husk (MBA) - Executive Chairman of the Board

Steven is an angel investor and independent director who has worked primarily in the financial services software space. Current investments include Rivo Software - a UK company in the GRI space, Dovetail a payments software solution and Point9 - a cloud based mid and back office solution.

Andy Davies - Founder & CEO

10+ years experience in collateral management at Northern Trust, JPMorgan & Pirum, most recently running Collateral Management sales for Omgeo.

Stuart McHardy - Co-founder & Managing Director

10+ years experience in collateral management at Northern Trust, JPMorgan & HSBC, most recently running Collateral Management product development for Omgeo.

Edward Boggis-Rolfe - CTO

15+ years experience in financial services IT including work at Sungard, principally in collateralised products, developing real-time high performance web applications.

Investors:

Richard Berliand – advisor to the board:

23 years with J.P.Morgan, most recently running the Firm's Global Cash Equities and Prime Services group of businesses (including Futures & Options, Prime Brokerage and Broker Dealer Services). Also led JPM's Market Structure Practice. Now holds a portfolio of non-executive activities (including the Deputy Chairmanship of Deutsche Börse AG) and a regular angel investor in the Fintech space.

Illuminate Financial - VC investor

Illuminate Financial Management LLP was founded in 2014 as a London-based venture capital firm with global mandate, exclusively focused financial technology that benefits capital markets participants.

Who are CloudMargin?

The Team

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“Collateral management … arguably the greatest problem facing modern

trading firms”

Editorial - Futures & Options World - 21 September 2015

“The financial services industry is expected to invest $53bn in technology and

infrastructure to address inefficiencies in the clearing and collateralization environment”

Celent “Maximising Collateral Advantage: A survey of Buy Side Business and Operational Strategies”. May 2013

Problem

#1

$53bn

“If you were to develop your operating model today from scratch, you could use

OpenGamma to price pre-trade,

CloudMargin

to deliver the margin, AcadiaSoft for the

messaging, and TriOptima for compression. That model would work wonderfully,”

Ricky Maloney (Head of Buy-side Client Engagement, Eurex - CCP, DerivSource Webinar. Jan 2016)

✔

“Collateral management has become a much more urgent, business-critical

concern for a much wider range of institutions active in the global securities and

derivatives markets, encompassing banks, brokers, investment managers, hedge

funds, pension funds, insurance firms and other asset owners.”

BNY Mellon October 2015

The Opportunity

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*Collateral management is also used with financial products such as Repo and Securities Finance

WHO IS

INVOLVED?

Any firm trading derivatives*- from the largest global investment banks to small corporations hedging financial

risk - tens of thousands of firms globally, increasing all the time as regulation brings

more firms into scope

WHAT IS

COLLATERAL

MGMT?

The process of reducing counterparty credit exposures through the

exchange of cash or securities “collateral”

HOW IS IT

DONE

TODAY?

For all but the very largest dealers, collateral is typically managed using spreadsheets

or other User Developed Tools. Using these solutions makes collateral management

highly manual, time consuming and prone

to

error

WHY NOW?

Regulation changes post 2008 have fundamentally changed

the collateral management world. These new regulations

are now coming on stream and even where firms are currently exempt, they are

not immune

The Opportunity

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Source: PwC

1 International Swaps and Derivatives Association (ISDA), "Margin Survey," June 2013.

2 Bank of England, "OTC Derivatives Reform and Collateral Demand Impact”, October 2012.

3 Celent、"Maximizing Collateral Advantage: A Survey of Buy Side Business and Operational Strategies," May 2013. 4 Depository Trust & Clearing Corporation , "Trends, Risks and Opportunities in Collateral Management," January 2014. 5 International Monetary Fund, “The Changing Collateral Space," January 2013.

The Opportunity

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COLLATERAL

MANAGEMENT

IS MANUAL,

EXPENSIVE

AND PRONE TO

ERROR

REGULATION IS

MAKING THE

PROCESS

INCREASINGLY

COMPLEX

TRANSACTION

VOLUMES ARE

EXPECTED TO

INCREASE BY

UP TO 1000%

Firms are being forced to do much more and cope with

added complexity. Legacy solutions are poorly suited to

current requirements

Most firms either rely on spreadsheets or outdated technology with poor upstream/downstream connectivity.

Dodd-Frank, EMIR, Basel III, BIS-IOSCO etc are adding new challenges such as

central clearing, mandatory variation margin, initial margin etc.

Manual intervention increases risk whilst reducing scalability. Firms are worried about being able to cope in

the future

The Opportunity

Problem Statement

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The Business Case

Platform Benefits

Configurable

Workflow

Intuitive

User Interface

Reduction in

Cost & Risk

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A technology p

latform accessible to all, copes with the latest

regulation and removes volume sensitivity

AFFORDABLE

Transparent Costing - “pay-as-you-go” Priced to compete with Excel

Immediate ROI

Mutualised regulatory change costs

UNDERSTANDABLE

Simple, web-based UX Process standardisation Intuitive, visual, logical

Designed by Collateral Managers

COMPLETE

Multi asset-class coverage

Supports current and future regulation Full collateral life-cycle coverage

Makes non-cash collateral easy

•

CloudMargin’s pricing starts at around 1/10th of competitors - accessible to the whole market

•

Implementation takes weeks not months, saving time and money

•

No expensive technology to support, patch or upgrade

•

CloudMargin is designed for modern work practices

•

Intuitive workflows and best-practice allow less experienced and cheaper staff to be utilised without

compromising on control

•

Makes complexity seem simple

•

Legacy systems date very quickly and don’t stay up to date with industry developments without significant expense

•

CloudMargin supports all latest regulation

•

Latest features available to all users

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The only cloud-based platform for the management of

collateral and counterparty risk

Delivering Control, Mastering Regulation, Driving Efficiency

“…we just agreed to everything they [investment banks] asked us to

do, now we’re calling the shots thanks to you guys”

Deputy Head of Treasury, FBN Bank (UK) Ltd, April 2015

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Source: PwC

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CORPORATES

Treasuries for their own use.

ASSET

MANAGERS…

…Large Hedge Funds, Insurers, Smaller Banks for

their own use.

TIER 1

BANKS

Banks are diversifying away from traditional, highly capital intensive activities and looking

to provide 3rd party collateral management solutions to their clients.

LARGE

DEALERS

Selling to Investment Banks in bulk to automate their majority manual client base

and reduce their support costs.

The Business Case

Four Revenue Streams

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Latest features readily available Features missing Ex pe ns iv e Low cost In house solutions - spreadsheets

Lacks control and robustness, very manual,

hard to integrate Not liked by regulators

In house solutions - custom developed application

Huge development cost, only suitable for the very largest firms Significant effort required to stay

up to date

Legacy software firms - Sungard etc

High cost, long sales cycle, slow to implement. Hard to keep up to date, new features require slow,

costly upgrades

Outsourcers- BNYMellon etc

High cost, much of the process stays with the client

The features the client needs at the price they can afford

State of the art, easy implementation

The Business Case

Competitive Landscape

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Metro Bank:

Alex Cockerell, Head of Treasury at Metro Bank - “Metro bank had the need for a collateral management tool, but not the appetite for investing in expensive ‘big bank’ collateral management systems and infrastructure. CloudMargin offered a cost-effective; pay-as-you-go; plug-and-play cloud-based system, so there was no need for IT hardware, software or implementation spends. But most importantly the tool is simple and intuitive to use, and saves us time”.

Old Mutual Global Investors:

Dan Cunningham, Head of Investment Operations at Old Mutual Global Investors - “I’ve been really impressed by the system’s functionality and by how straightforward the onboarding process was. CloudMargin has also been very responsive to our requests for enhancements”.

Aite Group survey of collateral management systems 2015:

“CloudMargin’s user interface is by far the most colourful and user-friendly of the vendor offerings in this space, which makes it ideally suited to users that are not accustomed to using an incumbent collateral management technology solution”.

Appendix One

Testimonials

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Q2 2016*

1st Mandated clearing under EMIR - largest banks

Q2 2017*

3rd Mandated clearing under EMIR - <8bn threshold

Q4 2016*

2nd Mandated clearing under EMIR >8bn threshold

2008

Financial Crisis

Sep 2009

G20 derivatives reform agreed

Jul 2010

Dodd-Frank Act becomes law

Aug 2012

EMIR enters into force

Mar 2013

First mandatory clearing in US *Expected

Sources: LCH/SWAPCLEAR and BIS-IOSCO

Q1 2017*

Mandated VM for all remaining

covered entities for BIS/

IOSCO

Q4 2018*

4th mandated clearing under EMIR non financials

Q3 2016*

Mandatory IM & VM on no-cleared swaps under BIS/IOSCO starts