Use Case | FRTB

CanDeal, a leading provider of electronic marketplacesand data services for Canadian dollar debt securities andderivatives, commissioned TickSmith to provide a datapooling platform that would ensure FRTB compliance forits stakeholders*. CanDeal is the neutral and jointrepresentative for its stakeholders, which include BMONesbitt Burns Inc., CIBC World Markets, National BankFinancial Inc., RBC Capital Markets, Scotia Capital, TDSecurities and TMX Group. With the FRTB compliancedeadline looming on the horizon in January 2022, one ofCanDeal’s objectives is to reduce the cost of capital setaside for at-risk assets for the six major Canadian banks.

Regulated by the Basel Committee on Banking Supervision,the Basel III FRTB (Fundamental Review of the TradingBook) framework requires that all financial institutionsglobally have sufficient capital to cover potential losses ontheir trading book. In addition, each firm must accuratelymodel the risk assessment using quality data in their riskmodels. By pooling their data into a broader and morecomprehensive dataset, each firm’s risk models are likely tobe more exact, which can greatly reduce capital costs.Another objective, aside from privately pooling data, was toallow these banks to better control and monetize thecombined data. The resulting derived content would notonly help the banks comply with FRTB regulations, butwould also allow them to generate revenue by monetizingthe pooled data that they previously gave away to themarkets.

The Challenge

TickSmith’s Data Pooling Platform empowers Canadian banksto anonymously share data for FRTB compliance.

TickSmith

Montreal | London | New York City | Toronto sales@ticksmith.com | www.ticksmith.com

Why TickSmith? AWS Deployment

TickSmith’s Data Pooling Platform had the fullcapabilities CanDeal needed to establish FRTBcompliance for the six major Canadian banks,plus additional dataset modules for new usecases along the way. Initially, the primaryrequirement CanDeal was addressing was a datapooling system for FRTB. To accomplish that,each bank would need access to a sharedplatform to normalize and collect theirproprietary data securely at scale, and to receivederived content from the collective data pool.When the data monetization use case quicklybecame another requirement, TickSmith’smodular system enabled the platform to adapt.

“To get the banks to approve this, I had todemonstrate that we could take the data, pool it,apply some FRTB risk qualifications,entitlements, encryption, monitoring, and anaudit trail… and TickSmith had a lot of those outof the box. So for time to market, it made a lot ofsense to leverage that rather than buildsomething new,” says Andre Craig, head ofDataVault Innovations at CanDeal. “Theregulatory capital savings could be in the billionsof dollars, so that makes the banks moreefficient, and delivers meaningful cost savings.”

“We have the experience, we have both thetechnological know-how, as well as theregulatory know-how,” says Jimmy Huang, DataPooling SME at TickSmith. “Regulatorycompliance meets big data technology – theseare very niche intersections. In terms of thatspecialty, we’re the only company that is able tocreate this distinguished product.”

TickSmith implemented their Data PoolingPlatform along with the FRTB Modelabilitymodule on AWS Cloud technology for easyand fast deployment. Building on premiseswould not be feasible, as cloud technologyallowed each bank to sign into the encrypteddata pooling web portal. The workflowtechnology of the Data Pooling Platformnormalizes and standardizes each firm’s data,yet at the same time, maintains the individualbank’s privacy and anonymity.

The platform’s enhanced entitlementcapability allows participating banks tocontrol how much data the other firms canview and access. The process of sending largeamounts of data in and out and mapping themtogether required security measures that mustbe rock solid and bullet-proof. “Each bank hastheir own level of security measures andInfoSec requirements that we had to meet,”adds Huang. “We had to jump through eachbank’s information security hoops and AWShelped us to meet those needs.”

Another challenge is that some of the OTCasset classes are quite complex and there arefewer standards. Therefore, creating commondata models needed to be more involved. “Wehad to adapt our Analytics Platform to copewith the rules of FRTB,” says Francis Wenzel,TickSmith’s CEO. “And we had to do enhancedETLs [extract, transform, load processes] onAWS Cloud for those asset classes.”

Montreal | London | New York City | Toronto sales@ticksmith.com | www.ticksmith.com