Summit versus Calypso The Big Fight?

Writer and Researcher Arif Mohamed

Calypso has been waging an aggressive battle to win clients from established trading and risk systems such as Misys Summit.
The contest began in earnest in 2001 when HSBC chose the Calypso Trading and Risk Management Platform as the processing system for its global treasury markets and securities trading operations. HSBC is also a big Summit user, which makes Calypsos win significant. The same year, Dresdner, First Union, and a subsidiary of Socit Gnrale also adopted Calypso. Then in 2002, ING decided to consolidate its back-office processing using Calypso. Since then, Calypso has won customers ranging from Citigroup to Wells Fargo; The Royal Bank of Scotland to Wachovia. In fact, the company now counts seven of the top ten global banks amongst its 15,000 users. Meanwhile, Misys has been building

steadily on its 15 years of market experience with Summit, a proven multiasset class platform. Summit has a huge global installed base, which it continues to develop in Asia and the Far East. Being a big player in capital markets, treasury and banking, Summit has attracted heavyweight banking customers such as Lloyds TSB, Commerzbank, Bank of Ireland and Deutsche Bank - which boasts one of the first global rollouts of Summit. However, Calypso is giving Summit a good run for its money. Banking technology experts have lauded its flexible, Java-based framework, its speed of implementation, and lower-costs in comparison with competing systems. Both Summit and Calypso have attracted some of the top IT consultants in the world, and they have become world experts in their fields at implementing and tailoring the two IT platforms for different banks. In this white paper, we ask four leading experts, all of whom are Cititec Consultants, whether Summit has reached its pinnacle, and if Calypso is poised to dance away with its customers. Our experts discuss the relative strengths and weaknesses of Calypso and Summit, as we look to the future of the two trading systems.

Contents:
Calypso: Fighting Fit. Summit: The Peak of Success. Conclusion: Summit or Calypso?

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Calypso: Fighting Fit

Both Summit and Calypso undoubtedly have their strengths as well as their weaknesses. They are both best of breed systems and can be tailored and extended extensively. However, Calypso experts argue that the platform is currently winning in the market because it is cheaper overall, more IT friendly, easier to install, and allows banks and traders to get new products to market quicker. IT departments also like it because its Java based, and this is viewed as a major strength in development terms.

Calypso: Fighting Fit continued...

IT Consultant Andrew Powell, who is both a Summit and a Calypso expert, pointed out that the actual underlying architectures of the two systems are very different. He argues that Calypso is superior to Summit in this respect. He said that Summit is a fifteen year old technology that has been extended and upgraded over time, gaining new Windows features, such as better graphical interfaces. Calypso on the other hand is about six years old, it is Java based, which makes it a lot easier to configure from a user perspective and as a developer. As long as you know Java and SQL, youre ahead of the game because you dont need the resources of a Summit person. Andrew explained that a Summit team will need to include a host of development experts, such as relational database specialists, and IT professionals who can use C++ and SDL, the Summit Documentation Language writer. With Calypso, you just drop the relevant Java file into your directory, and the system picks it up. This results in a high turnaround to any system upgrades or inhouse implementations. From an architectural perspective, Calypso is based on a number of processing engines - multithreaded servers - that work alongside each other, said Andrew. These engines process events throughout the day. Events might include trade activity, corporate actions, accounting events, postings, and the generation of new documentation. The dedicated processing engines work on these, removing the load from the core processing architecture. This makes Calypso as a whole run faster and more efficiently, enabling it to process a higher volume of trading, said Andrew.

these things add to the package of Calypso. Calypso is the answer for certain institutions such as ING and some hedge funds who are convinced when they see how rich Calypso is, and that it also does commodities, futures, and the whole suite of financial products. In my opinion, Calypso is expanding far more quickly than Misys in terms of gaining more new clients.

Where Calypso Comes Up Short

Calypso is a good platform but is very much a build-and-buy solution, commented Paul Marshall. You are buying a toolkit, but you then have to spend a lot of money developing the applications, and that is a very big difference between Calypso and Summit. Paul added that the IT team also has to make sure it doesnt change the underlying core code. I have got around that by building a layer around it that talks to Calypso, rather than changing Calypso itself. Other banks change the code but then you have complications with licensing and also managing the code itself, said Paul. The Java aspect of Calypso is a big attraction for good developers who find Java easy to pick up. However, Java itself has a couple of weaknesses, said Paul. For example, as soon as the user starts to drill down into their information, the system proliferates a number of pages. That is one of the bugbears of the traders. They are opening hundreds of pages, rather than the application navigating them through. Andrew Powell agreed that the Java architecture, whilst flexible, can also have its drawbacks. Being able to drag and drop files into directories is good. But because you are in the realm of a new architecture, certain components are flawed on the technical side...For example, you are limited to certain threads of certain servers, and the object classes can always be improved. But compared with Summit, Calypso leads in the back office, the front office and in interconnectivity, and the hardware structuring leads to an increase in performance, he said.

Flexible Friend
Paul Marshall is Calypso Project Manager for Rabobank and has a team of 12 Calypso experts. He has been working with Calypso for three years on various projects. His most recent project is to implement Calypso for Rabobanks front office, specifically for credit derivatives, fixed income and portfolio management. Calypsos real strength is that it has got a very flexible data model, said Paul. When you put in your own bespoke information, it automatically proliferates throughout the system. This means you only have to put in your data attributes once. He added that Rabobank has integrated its own pricing models, which shows how modular Calypso is. Even though I am doing a front office implementation, Calypsos strengths are also in the back office, and the flexibility of workflow. You can turn it into a complete exception-based tool, with automated processing, except when something doesnt conform. Plus its all graphical so business analysts can use it. But despite stealing a march on more established systems - such as Summit - our experts said that Calypso also has its drawbacks. We will look at some of these in the next section.

Taking Control
Another of Calypsos strengths is that it can allow traders to take more control of their trades using the front end software, said Andrew, who is a former bond trader. With Calypso traders can create their own exotic instruments and plug in their own prices and market volatility. Added enrichment comes from being able to pull dynamic data into Calypso for example Bloomberg feeds, said Andrew. Calypso has dedicated SWIFT clearing interfaces and Bloomberg feeds all out of the box, which Summit doesnt. All

Calypsos Strengths:
1. 2. 3. Calypso is Java-based which is appealing to IT departments This also makes it more flexible to develop and extend Calypsos strengths are in parallel processing, integration and workflow

Calypsos Weaknesses
1. Java has its drawbacks, being a relatively new programming technology Banks may have to invest heavily to extend and hone their Calypso system Applications produce a large number of pages which irritates traders and end users

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Summit: The Peak of Success

With Calypso battling hard for market share, does this spell the end for Summit? We gained the valuable insights of two renowned Summit consultants, at Lloyds TSB and HSBC. Our experts argued that Summit has a longer track record than Calypso, and is extremely powerful and extendable. In addition, Misys is experiencing market growth in Asia, and expanding the number of outsourcing locations that offer remote operational support for Summit. Dev Tamana at Lloyds TSB is a highly regarded Summit expert. He has been working in capital markets in Summit for ten years. During this time, he has gained formidable experience in the platform, from front to bank office, as well as developing a deep understanding of the whole workflow process. He said, Misys has got a really strong package from front to back. In the past, Summit has always been more focused on fixed income and back office processing. But I believe that it has now come up to scratch on equity derivatives and back office workflow. Misys has made considerable investments in all asset classes, derivatives, credit derivatives, OTC, fixed income, and so on. Dev argued that Summit is strong in capital markets, treasury and banking, though it is perhaps not the biggest player in these areas. But he added that its strength is also in its extensibility. Many banks require the system to be customised, enhanced and integrated into their existing feeds and banking systems, and Summit is very adaptable, said Dev. Devs recent experience at Bank of Ireland illustrates this adaptability, although he admits that it wasnt all plain sailing.

the software wasnt refined because no one else was using it yet. After we implemented, tested and ran the software, it was working well and delivered a good solution for Bank of Ireland, Dev concluded. Manoj Mistry is another leading expert on Summit, and was involved in one of the first global rollouts of Summit, at Deutsche Bank. He said, Summit is very powerful and completely extendable. In most banks, the people who are making the decisions dont fully appreciate how extendable it is. As a result, business managers do not always recruit the right level of expertise when it comes to extending their Summit systems, and this could be considered a

spread across the user contingent, said Manoj, who had to win back hearts and minds.

Following the Curve

Several of our experts noted that Misys tended to follow the curve when it came to introducing new enhancements and modules to the Summit platform. This was the case with the IFRS module mentioned above. Dev Tamana said that for Misys, the IFRS39 standard had to be implemented in 2005, by which time a lot of banks had already built their own solution for IFRS accounting. Summits hedging and risk software is another example of a set of tools that many users have decided to shun because they follow, rather than lead the technology cutting edge. Manoj said, Summit has a reasonably comprehensive set of tools for this purpose but it does have limitations, and some banks dont use the core Summit way of doing things, instead choosing to build their own hedging and risk tools. Deutsche Bank is an example of this. Misys tends to follow whatever methodology is out there, rather than leading. Andrew Powell said that yet another example of Misys falling behind was with its MUST (multiple underlying structured trade) module, which he said is similar but not as powerful as Calypsos technology for structured products. He added, At one point Summit was the best thing since sliced bread, but they have fallen behind the curve. Calypso is now the leader in CDS (credit default swap), it can run real time risk analysis at the desk, and you also have the back office functionality.

Summits Strengths
1. Summit has a longer track record than Calypso and well established services It is extremely powerful and is strong from front to back, and across asset classes Summit is highly customisable and extendable with the right expertise

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shortcoming of the system: to get the most out of it, you need to hire the best.

Summits Shortcomings
Unlike the Java-based Calypso, Summit is Unix and Windows-based, and can be more complex to develop, with longer lead times, said our experts. Manoj argued that Summit is very powerful, and has a uniform way of extending it if you know what youre doing. But it can also be complex. Summit is a complicated system, and you need good Unix, database and infrastructure people. But because its also a very comprehensive system, you can use it for heavy duty capacity processing. It is ideally suited to investment banks, or corporations with treasury departments that need to capture and record derivatives data for hedging purposes. But Manoj added, I wouldnt recommend it to smaller organisations, as it is not a retail system. Another issue that Manoj has experienced is that the Summit front end has irritated end users in the past, though the vendor has worked hard to make it more graphical and user friendly, with more recent updates of the software. In one instance, some of the credit derivative traders at Deutsche Bank took a dislike to the interface and developed a negative mindset towards Summit, which

Summits Weaknesses
1. Summit is Unix and Windows-based and can be more complex to develop than Calypso The platform is suited to certain types of organisations but not others Misys tends to follow the curve in bringing new enhancements to Summit

Bank of Irelands IFRS Project

Bank of Ireland (BoI) was the first bank to buy and implement Summits IFRS (International Financial Reporting Standards) accounting module, led by Devs Summit team. The project allowed the bank to decommission 1500 accounting spreadsheets, replacing them with a system that automated many of the processes. Dev and his team built the solution for BoI, introducing a large number of enhancements to make it specific to BoI. He said the IFRS module was highly customisable, but pointed out, There was a lot of code that had to be worked on to get the software to work properly. It also took a while to iron out the bugs in the system as

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Conclusion: Summit or Calypso?

Both Summit and Calypso have firmly established themselves within the worlds top banks and financial institutions by offering solid performance for cross-asset trading and risk operations. As such the systems, and the highly experienced IT consultants who run them, are responsible for successfully supporting huge volumes of trading activity across the world every day. The future success of both platforms is largely dependent on the technology itself, and how the vendors develop their systems going forward, whether they are Java or Unix/Windows-based. The older Summit platform is very powerful and extendable, but needs the support and backing of the business to get the best out of it, and this means recruiting the right IT expertise. Calypso, on the other hand, is waging an aggressive battle for customers. It has on its side new, more modular technology, powerful multi-threaded processing, and strong integration with applications and feeds. At this point in time, the new kid on the block may well have the edge on the previous generation.