Counterparty risk innovation of the year: Cumulus9

In times of unpredictable market upheaval and heightened cyber crime, market participants require powerful tools that can help them manage risk more effectively, gain access to margin transparency and provide operational resilience. 

Cumulus9 proved standout vendor by bringing inventive solutions to the market in this space, and has secured the award for Counterparty risk innovation of the year at the Risk Technology Awards 2024.

Cumulus9’s innovative cloud-native solution aims to increase the transparency of derivatives margin models by empowering market participants to forecast and gain deeper insights into margin requirements, especially in periods of market volatility and stress events.

Rafik Mrabet, Cumulus9

The platform’s core strength is giving users a comprehensive understanding of portfolio risk, initial margin and margin add-ons. It stands out from competitors by providing a comprehensive view of historical margins against historical market data, as well as helping them understand and predict how margins change under different market conditions.

The platform replicates central counterparty (CCP) margins and provides a mechanism for understanding those margin figures through the calculation of a 10-year historical profit and loss (P&L) and historical value‑at‑risk (VAR) for any given portfolio of cleared exchange-traded derivatives. Other key capabilities include forward-looking hypothetical margin changes and stress scenarios of price moves of cleared portfolios.

The platform’s extensive functionality provides detailed analytics that explain how the portfolio CCP margin is adequate for covering risk, including its historical backtests and variability over time. These P&L vectors are instrumental in projecting the potential path of VAR across various confidence intervals, enabling the forecasting of margins to better manage risk and liquidity.

A key innovation of the platform is the Portfolio Loader, which streamlines and accelerates the integration process, ensuring seamless onboarding and operational resilience. Clients can perform calculations effortlessly by loading data from any position file format into the platform. This eliminates the need for tedious manual data updates and normalisation, saving time and reducing the risk of errors.

The Portfolio Loader’s intelligent algorithms automatically recognise and standardise contract symbologies from various sources such as ION, FIS, Bloomberg, exchanges and trading platforms.

With eyes on the future, Cumulus9 expects a substantial shift in customer needs over the next 12 months, primarily among clearing and trading firms, as global CCPs transition from the traditional Standard Portfolio Analysis of Risk – or SPAN – margin models to complex VAR‑based margin models.

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As new intricacies of VAR further emphasise the need for advanced analytics, the firm believes clients will increasingly seek solutions capable of dissecting and explaining the impact of market volatility on margin requirements for robust portfolio management and decision-making. Regulatory compliance and reporting are also expected to undergo changes as new risk models are implemented.

As changes unfold, the need for deep analytics, transparency and educational support will continue to rise. Cumulus9 is confident in its ability to empower clients in navigating this new era in derivatives clearing.
 

Judges said:

• “Excellent coverage of client requirements.” 
• “A product that is solving a notable market-wide challenge.”
• “Increasing transparency of margin models and allowing market participants to gain deeper insights into margin requirements is a worthy endeavour in current markets.”
   

Rafik Mrabet, managing director at Cumulus9, says:

“Winning the Counterparty risk innovation of the year award is a testament to Cumulus9’s commitment to pioneering solutions that enhance margin transparency and risk management. Our platform’s ability to equip market participants with advanced risk analytics and operational resilience is crucial in navigating today’s dynamic financial landscapes. We are deeply honoured by this recognition and remain dedicated to leading risk management innovation.”

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