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ICY Software: A Different Approach to the Market


Paris-based ICY Software has added a structured deposit suite to its ICYfx and ICYfxnet currency options systems. The new offering enables users to construct structured deposits based on the option strategy being analysed in the pricing page. The move follows the introduction of a request for quote (RFQ) mechanism in conjunction with Dresdner Kleinwort Wasserstein (DKW) (see Profit & Loss, April 2002).

The company is focused on providing options tools for sales people, corporate treasurers and fund managers. Charles Monot, ICY’s founder and CEO, addressed what he perceived to be a gap in the market while head of FX options research at Smith Barney (France). As he saw it, traders were well served with options pricing tools, but sales people, treasurers and fund managers had little that could help them analyse and manage their portfolios or produce clear reports.

The system, which is linked to a real time market data feed, offers pricing strategies for all options actively traded in the markets, from vanilla to windows. Users can see how market changes would impact a strategy with graph, matrix and what-if analysis, as well as report and export functions and position management tools, which enables them to mark-to-market open positions, follow profit/loss in real time and analyse the potential of a position.

Play to Your Strengths

Monot is relatively unconcerned by the possibility that proprietary bank sites may add similar tools. “I don’t think the proprietary bank sites will add tools which could undermine us,” he says. “When I started the company, one of my main concerns was that banks, especially the big banks, would be able to do what we are doing in a more interesting way internally.

“But in the end, banks are not software companies, sometimes they invest in projects and software, but they do not have the same follow-up that we can offer,” he says. “When you speak about options, everybody starts to ask traders, risk managers and structurers what they want from a system. Usually in the project team, you have some people from the trading team and some IT people, but nobody from the buy side. They may make a powerful system, but it is not adapted for the people on the buy side.”

Monot adds that the company is currently in discussions with a number of market participants, including what he calls a big player who has an Internet-enabled pricing system, but wants to plug it into an ICY interface to avoid wasting resources on creating a tool that already exists. “What we tell the banks is that their way of adding value is not in creating a nice button to create graphs, it is in making new pricing models or better ways to price specific options,” he says. “They would be spending a lot of money to make something that already exists and they could buy as a commodity.”

Monot says the Internet version still needs some work before he is satisfied. “It is not yet where we want it in terms of user friendliness. At the moment, it is really simply a copy of our PC version, so we need to adapt it to take into account the Internet way of working – we want to make it more ergonomic,” he says.

RFQ with Dresdner

The introduction of the RFQ option followed the system being implemented at DKW’s Frankfurt, London and New York offices. “We have many small banks, and because they do not have market making activities, they simply do deals back-to-back. It seemed interesting to Dresdner and ourselves that these people, when they are thinking about their strategies, could ask for a quote on them directly just with a single click.”

Like the proprietary bank FX trading portals, ICY has chosen to begin its trading experiment with DKW with an RFQ mechanism in order to ascertain the market response. “It is easier to start with something simple and to see what the clients think of it, than build something very complex like click and deal. We first want to see how it is working, how our clients are using it. We may make it more complex once we know what the market reaction is.”

Monot emphasises the different approach ICY takes to the market which he feels will ensure that the system thrives. “The big idea is that we are not trying to get the market maker business, we concentrate on the buy side, so we are not competing with Fenics or DerivaTech,” says Monot. “We have designed a product for the people who have other roles and needs within the trading structure. It is a complementary tool that does a different job.”

 

Profit & Loss

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