Introduction
Parameta Solutions’ OTC data, sourced from the TP ICAP Group, is a versatile and indispensable tool for financial institutions in Sub-Saharan Africa, extending beyond traditional risk management. This case study highlights the data’s application in market research, market monitoring, regulatory compliance (including PVA and FRTB in South Africa), and advanced risk management practices like backtesting.
Beyond Traditional Risk Management
Parameta Solutions’ comprehensive OTC data enables financial institutions to leverage market intelligence and meet complex regulatory requirements in innovative ways:
• Market Research at Commercial and Central Banks:
— Both commercial and central banks utilize Parameta Solutions’ data for in-depth market analysis. The granular detail and real-time/intra-day/end of day (EOD) updates provide valuable insights into market trends, liquidity conditions, and pricing dynamics. This data supports strategic decision-making, market forecasting, identification of emerging opportunities, and mitigation of challenges.
• Market Monitoring by Central Banks:
— Central banks employ Parameta Solutions’ actual trade data to effectively monitor flows and volumes related to their currencies and instruments across otherwise opaque FX, rates, and bond markets. This visibility enables them to track market activity, identify potential risks, and implement timely remedial/regulatory measures as needed. This data effectively enhances their ability to maintain market stability and ensure regulatory compliance.
• Prudential Valuation Adjustment (PVA) Compliance in South Africa:
— Banks in South Africa leverage Parameta Solutions’ bid-offer data to meet the stringent Prudential Valuation Adjustment (PVA) requirements. Specifically, they utilize the data to calculate 90% confidence interval pricing and curves, essential for fulfilling the Close-Out Cost and Market-Price Uncertainty components of the PVA.
— This application is critical for banks to comply with the South African regulatory deadline of July 1, 2025, for PVA implementation. Parameta Solutions’ data provides the necessary precision and reliability to ensure accurate calculations and regulatory
adherence.
• Fundamental Review of the Trading Book (FRTB) Compliance in South Africa:
— Financial institutions in South Africa utilize Parameta Solutions’ data to meet the demanding requirements of the Fundamental Review of the Trading Book (FRTB). The high-quality, real-time data is essential for accurate modelling, risk measurement, and regulatory reporting under FRTB.
• Backtesting:
— Financial institutions across Africa use Parameta Solutions data for backtesting risk models. The accurate historical data allows firms to check the validity of their risk models, and to make improvements to those models. This is a vital part of regulatory compliance, and internal risk management.
Key Benefits of Parameta Solutions’ Data for These Use Cases
• Accuracy and Reliability: Daily (real-time/intraday/EOD) inter-dealer broker data ensures the highest level of accuracy, crucial for informed analysis, risk management, and compliance.
• Comprehensive Market Coverage: Extensive global market coverage provides a holistic view of market activity.
• Timeliness: Real-time updates enable timely responses to market changes and regulatory requirements.
• Regulatory Compliance: Facilitates adherence to complex regulatory frameworks, such as PVA and FRTB, reducing compliance risk.
• Enhanced Risk Management: Enables robust backtesting and model validation.
Conclusion
Parameta Solutions’ OTC data is provides a critical edge to financial institutions in Sub-Saharan Africa, extending beyond traditional risk management. Its application in market research, market monitoring, regulatory compliance (including PVA and FRTB), and advanced risk management practices like backtesting demonstrates its versatility and value. By providing accurate, timely, and comprehensive market intelligence, Parameta Solutions empowers these institutions to navigate the complexities of the financial markets and meet evolving regulatory demand.
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