This article was written by Dharrini Bala Gadiyaram, Global Head of Enterprise Risk at Bloomberg.
Risk managers tackling a market rife with uncertainty need a technology framework that they can be absolutely certain about – one that can quickly adapt to fast-evolving needs, with seamless front-to-back interoperability.
Over the past month, macro signals such as yield curve inversion of the U.S. Treasury curve and global inflation rates hit levels unseen in the last 20 years. Nearly all markets, from stocks and bonds to commodities and crypto, have exhibited superlative trends this year. These rapid shifts in asset prices have presented new trading opportunities for the buy-side and delivered increased volumes for the sell-side, but the current market volatility and continued uncertainty has led firms across financial services to be cautious in their outlook and tighten up operations. Meanwhile, risk technology teams are caught somewhere in-between, lowering costs yet allowing their trading desks to capture every opportunity.
APIs emerge as a natural choice that provide meaningful solutions here. They deliver risk analytics with a lower latency, lower cost and higher performance as they allow for deeper integration across applications, along with a seamless end-user experience, compared to systems reliant on data delivery through bulk files or disparate user interfaces.
APIs are not new, but the ever-increasing volume of data and analytics that risk managers have to contend with is causing them to seek tools capable of processing that data more efficiently. They are looking for tools to turn that data into signals that are actionable, timely and relevant – and this has led to significantly elevated interest in APIs, especially from banks and large asset managers.
Different folks, different strokes
Seasoned traders and risk managers often have their own unique ways of looking at risk. Even at firms that may have been fortunate enough to implement ideal starter risk systems, as trading operations expand, they may find themselves heavily depending on their technology vendors to maintain multiple views with unique selections of bespoke risk analytics. This could involve reconfiguring the way exposures and sensitivities are calculated, adding a dimension to risk analysis by rerunning all analytics under stressed conditions or introducing new analytics that help make sense of an unprecedented market shift. Constantly having to rely on technology vendors to update their analytics and interfaces to accommodate these needs can be time-consuming and inefficient.
Flexibility is the name of the game
All of this can be made much easier with a framework where the risk technology team is able to maintain front-end user interfaces and workflows fed by APIs from their risk and data vendors. This gives them a flexible way to offer every user within their firm the most relevant risk analytics and data that they need. Sales teams can use light interfaces for indicative pricing, traders can quickly update positions to receive real-time risk analytics refreshed throughout the day, and risk managers can review custom-made dashboards with enterprise-wide risk measures, all fed through APIs utilizing consistent pricing models and market data. If need be, this framework also allows them to maintain a uniform user experience while switching between vendors in the back end, without the overhead of training users on brand-new user interfaces and workflows.
Midway between buy and build
One of the primary concerns for firms growing into increasingly complex risk needs is that of buy vs. build. Firms often grapple with whether to invest in a customized in-house risk system built from scratch or to adopt a vendor system that may have most but not all of the analytics, interfaces and workflows the firm needs. APIs are an excellent way to meet in the middle by customizing interfaces and analytics to enable them to function as an organic part of the trading and risk environment while outsourcing the technical burden of maintaining services such as data warehouses, pricing models and computational servers to specialized vendors.
APIs are also a necessity for trading desks to grow into macro and quantitative trading strategies that rely on processing a wide spectrum of data and analytics into trading signals. Firms developing machine learning (ML)-based models for algorithmic trading, especially those that use large volumes of data and complex statistical models, are increasingly looking to cloud-based services to meet the computational needs of their trading desks. Clients of Bloomberg’s real-time market data feed, B-PIPE, can now access the risk analytics and data required as model inputs in the cloud, allowing these firms to focus on their core competencies while efficiently scaling up their operations.
The consistent growth in the use of APIs highlights the increased appetite for these services across both buy- and sell-side firms. Working with a trusted technology partner, such as Bloomberg, helps clients ensure they have access to industry leading market data and analysis along with scalability for their risk management and trading needs.
A technology partner for the road ahead
Bloomberg’s Multi Asset Risk System (MARS) is our award-winning suite of applications covering front office, market risk, XVA, credit risk, hedge accounting and collateral management. MARS API is a library of programmatic interfaces that covers a wide range of risk analytics from stress testing, Greek sensitivities and Value at Risk to x-valuation adjustments (XVAs) and credit risk analytics.
Our APIs are designed to work with ad-hoc collections of cash and derivative instruments, positions maintained through our buy-side portfolio risk system PORT or in our order management systems TOMS and AIM. Through Bloomberg’s data delivery platform B-PIPE, MARS API analytics can also be accessed via cloud-based services.