1. TriOptima – Swedish FinTech
ICSA AGM, May 24 Viktor Johannsson, Co-head Business Management
Introduction
Scoffed at PP

2. How it all started…
The story of TriOptima begun like a lot of other successful tech companies
TriOptima founded 2000
Four founders
Company was based on a brilliant idea; OTC derivative inventories can be greatly reduced
IT bubble burst shortly after the company was founded

3. …and got going Financial Times, May 1, 2003
EUR 420 billion of IR swaps terminated in first ever multilateral termination cycle
17 banks participated in the run
It was the biggest derivative transaction to date

4. …and got very busy
TO’s services got stress-tested during the financial crisis 2008
During the crisis, reports from our services went to CFO-level of major dealers
The weekend before Lehman defaulted we were on standby to run a compression cycle

5. Multilateral compression

6. Bank A B C D E Multilateral compression - Concept
Consider your trades vs 5 counterparties:
Net Market
Exposure
Bank A B C D E
Payers
Receivers 6
confidential - sensitive

7. Multilateral compression - Concept
1-to-1 terminations can (in theory) achieve:
Net Market
Exposure
Bank A B C D E
Payers
Receivers 7
confidential - sensitive

8. Bank A B C D E Multilateral compression - Concept
Multilateral compression eliminates more trades, without changing market exposure
Net Market
Exposure
Bank A B C D E
Payers
Receivers 8
confidential - sensitive

9. Counterparty risk reduction via triReduce
Counterparty risk before triReduce cycle
Counterparty risk after triReduce cycle
Peaks and troughs are flattened off
Actual result from a triReduce cycle
- Counterparty risk is flattened
FinTech comes in:
Huge optimization problem subject to 20 million constraints
Need to complete the run in a short period of time while markets are closed
triReduce supports compression of
Interest Rate products in all

10. Reconciliation, Margining & Dispute management

11. Reconciliation, margining & dispute management
Variation Margin (VM)

12. Reconciliation, margining & dispute management
MarginDispute

13. triResolve’s network approach
Bilateral model
Network service model
Dealer
Buy-side firm
Dealer
Buy-side firm - -- - -- - -- - -- - -- - -- - -- - -- - -- - -- - -- - -- - -- - --
Dealer - --
Asset Servicer
Dealer
Asset Servicer - -- - -- - -- - -- - -- - -- - -- - -- - -- - -- - -- - -- - -- - -- - -- - -- - -- - -- - --
Regional Bank
Energy
Firm
Energy
Firm
Regional Bank
Pre-Lehman Firms’ exchanged spreadsheets in event of disputes
Highly re-active approach
Web-based approach
Facilitates a collaborative workflow
Daily margin process
Cost effective
Network model allows analysis that’s not possible under a bilateral approach
Benchmarking; how do I compare operationally to my peers?
Industry average pricing; how do my valuation compare to my peers
Financial technology challenge
Provide a service which is faster and , yet serves
Data: 60M transactions per week / 3 billion records per year - -- - --

14. Achievements to date
1,600+ banks & financial institutions subscribing to our services, including all of the top-100 banks >90% of global uncleared OTC derivatives now reconciled regularly through our services USD 750 trillion in notional amount terminated
- 60M transactions reconciled each week
Gross World Product is USD 77 trillion
~10 years of Gross World Product

15. Stockholm as a FinTech hub
Stockholm has been ranked as the 2nd largest city for financial technology in Europe
London number one
FinTech companies in Stockholm has attracted significant funding the past five years

16. Strong engineering tradition
Some examples include Ericsson, ABB, SAAB Aerospace
But

17. Excellent infrastructure & high IT literacy
Internet access by country
Source: Wikipedia (2013 rankings)
Source: Akamai Q rankings
Internet connection speed
Strong infrastructure
Good Internet coverage
High connection speeds
5% of the population in Sweden is >80 years
Large part of the population good knowledge of IT
Strong infrastructure does not stop there. Central electronic registers of:
Citizens and corporations
Houses/properties
Tax records
Etc.
This infrastructure is enabling financial electronic services
For example: Electronic ID, it is possible to open a bank account or even take a mortage without visiting a local bank office
You don’t even have to visit the bank to become a client

18. Swedish FinTech - roots from the 80s
OM, Optionsmäklarna, one of the first electronic exchanges
Spotify

19. Environment for FinTech companies
Environment for FinTech companies - characterized by a high pace of change
The following quote from Darwin puts it well:
FinTech companies leverage technology that enables clients to do things smarter, faster, cheaper and better than before.
The flip side is that new disruptive technology may be around the corner
Must be in the FinTech company’s DNA to adapt to change
I think we have very exciting time ahead of us
Technology will enable significant change
It will be possible to automate many routine tasks

20. Thank you!