Use Cases

Protect Net Asset Value Against Market Volatility Risk

Real-Time Intraday Visibility and Control Over the Net Asset Value (NAV) of Investment Portfolios

Background

Market volatility has become a fact of life, and will continue to be for the foreseeable future. Global worries about weakening currencies, the Ebola scare, oil volatility, monetary policies, global conflict tensions the stability of the economies have made investors skittish. Forbes noted that the number of days when the Dow Jones Industrial Average climbed or fell by 100 points more than doubled in the second half of 2014. According to market-watchers, that volatility will likely continue, which means that unexpected, dramatic corrections may happen at any time.

Challenges

A matter of minutes during a trading day can make the difference between healthy performance and a disastrous margin call. Unfortunately, financial institutions typically only have insight into their customers’ portfolios’ net asset value (NAV) at the end of the day when the market is closed and prices are locked down or when trades are executed. Because they lack continuous, realtime visibility into how their customers’ portfolio balance is affected by the market’s ups and downs, organizations are unable to take in-the-moment, corrective actions to prevent after-hours margin calls — which can force a mandatory, unfavorable trade when the market opens the next morning.

If financial institutions could monitor intraday portfolio balances for every customer account, rather than just after a trade or at the end of each day, the institution could take immediate action if a non-traded equity experiences a volatile price decline. The ability to do this requires realtime access to a number of data sources and streams, including trade and settlement systems, market feeds, transactional logs, and web server logs — calculated, aggregated, and cross-referenced to enable detection alerts, and workflows in realtime when an account is in danger of becoming underfunded.

Striim Solution

The Striim platform enables financial institutions to gather different kinds of pertinent data to recalculate the NAV for every portfolio with every tick of the market. The platform can correlate multiple streaming sources of transactional and market data in realtime, and can measure it against historical context data to identify thresholds. The financial institution can also use the realtime data to pre-screen trades during execution and deny them if they put the account into an undesirable position.

As conditions change and balances trigger a margin call, the system triggers workflows to alert staff or take automated recovery measures that save the institution from a setback at the end of the trading day. Financial and business analysts can easily access the data to monitor real-time conditions, dashboards, and reports without the need for support from IT teams.

With the Striim end-to-end, enterprise-grade real-time stream analytics application, IT professionals can focus on building out value-added business logic, rather than maintaining stream analytics infrastructure. The platform offers robust services, high performance and enterprise scalability.

Benefits

Getting a margin call at the end of a roller-coaster trading day can be potentially devastating, because it can force investors to trade as soon as the market opens despite typically unfavorable conditions. Customers must scramble to produce cash to cover the deficit, or may even find their market positions liquidated automatically to reconcile the underfunded position. Multiple instances may even cause the Federal Reserve to restrict trading on accounts.

The Striim platform enables financial institutions to leverage data they already have access to but examine it with agility, in real time, to gain up-to-the-millisecond, accurate assessments of customers’ portfolios’ value and act immediately if equity balances fall below tolerance due to intraday price volatility.

Industry

  • Financial Services

Realtime Use Cases

  • Financial risk management
  • Real-time portfolio management

Business Impact

  • Realtime visibility into net asset value of portfolios
  • Ability to prevent devastating financial impacts of margin accounts
  • Realtime alerts and automatic workflows to take or prevent actions based on up-to-the-second balances

Data Source

  • Trading system data
  • Settlement system data
  • Market feeds
  • Transactional logs
  • Web server logs
View More Use Cases

GET STARTED