Deutsche Bank Adds Derivatives Functionality for Clients

Deutsche Banc Alex. Brown is beefing up its suite of products and services offered through its Global Equities Division to include online derivatives trading analysis and risk management through Derivatives.com. The new ASP service launched by Imagine Software will enable Deutsche Banc Alex. Brown global equities clients to access the Web-based product suite for theirs and their client's benefit.

Deutsche Bank currently runs its internal derivatives systems with Imagine Software products and was looking for a way to extend the risk management capabilities out to its clients. "As we've grown our equities businesses we've diversifed from proprietary positions into more customer-related businesses," says James Rowen, global managing director and co-head of equity prime services at Deutsche Bank. Deutsche Bank's equity prime services include securities lending, prime brokerage and structured finance for hedge funds, pensions and institutional clients.

Of key importance to this new arrangement was the ability for Deutsche Bank clients to realize the benefits of derivatives risk management and in turn gain customer confidence. "It allows risk transparency and modeling and the ability to document risk management techniques," says Rowen. "It gives the investor more comfort when he invests with a manager that has trading tools and risk management that are documented, proven and reliable. That's a big selling point when we're out talking to investment managers."

The Derivatives.com service is hosted by Imagine and can be accessed through the Deutsche Bank site or users can access the site directly. Rowen explains that potential users include not only new investment managers looking for capabilities offered through Derivatives.com but also managers who are finding their current systems too expensive or difficult to maintain.

"The number of opportunities for investment managers have tightened during the last couple of quarters and the costs associated with keeping their own systems up and running may have become prohibitive," says Rowen. "So users are experimenting with this as an alternative to either systems that they've leased from other vendors or have built internally." He adds that the costs dedicated to system administrators, quality control, data, hardware, servers and other resources can be avoided by using the Derivatives.com service.

Deutsche Bank clients can use the Derivatives.com service for derivatives portfolio and risk management for listed and over the counter securities through their browser. Users can trade derivatives on underlying securities, track live P&L values and examine exposure to shifting market prices, interest rates, volatility, yield-curve assumptions and other risks with 24-hour support through Derivatives.com. Users will also have the option to access Deutsche Bank data or Imagine's data on the service. While the infrastructure is standardized through the Derivatives.com site, users can choose their data and can also lug in proprietary models they might want to use in addition to the ones available through the site. "It's really about getting to know the customer and what they are looking for and then making sure it's available to them," says Rowen.

There are currently several Deutsche Bank users testing the Derivatives.com service with the service expected to be made widely available in the beginning of the third quarter. "Customers are evaluating it because we assume most of them aren't going to just flip a switch and say they're off one system and onto another one over night," he explains. "There's going to be a transition and a user acceptance testing period."

In terms of pricing, Rowen says the exact details are yet to be ironed out and will depend on the type of user. "It could be a soft dollar arrangement, it could be a direct cost, we're not trying to make this cookie cutter so that clients have to fit into one box or can't use the system," he adds. "In summary, the goal for Deutsche Bank is to offer its clients all the tools they need to enhance their strategies."