Cumulus9 Eyes Commodity Derivative Players
Cumulus9 came to our attention recently. According to its website it is “reshaping the landscape of risk management for exchange-traded derivatives. We leverage the power of cloud technology to unlock new dimensions in margin forecasting and risk analytics.”
Recently, I spoke with Giuseppe Fiocco, Founder & Managing Director, and Rafik Mrabet, Managing Director, to learn more. “We service derivative market participants,” they told me. We serve clearing brokers and end user customers that include commodity trading firms.” It has replicated the clearing house margin calculations for over 80 exchanges even including those that have shifted from SPAN margining to VaR-based mechanisms. “We understand both and so that allows us to help in terms of transparency around how these work and how to understand margin calls.”
Cumulus9 was founded around two prominent challenges that it says has emerged. “Firstly, during volatility spikes, many market participants struggle with substantially higher margin calls than their daily averages, highlighting a critical gap in preparedness for potential margin fluctuations. Secondly, there exists a lack of transparency in CCP margin models. This opacity impedes effective risk management and restricts market participants’ ability to estimate and efficiently anticipate margin calls from CCPs,” they said. According to product literature provided to us, the solution it developed provides benefits such as,
- Detailed margin explainability, beyond mere replication, grants users enhanced clarity on their margin figures and risk exposures.
- Comprehensive view of historical margins, together with market data, offers unique insight into margin shifts across varied market conditions.
- Deep dive into portfolio risk, CCP margins, and margin add-ons provides users with unparalleled transparency and forecasting capabilities.
- Generation of a 10-year historical P&L for Portfolio Value-at-Risk or Expected Shortfall of cleared exchange-traded derivatives.
- Advanced stress testing capabilities allow users to create stress scenarios by shocking prices and implied volatilities by sector, sub-sector, or individual position.
The platform is cloud-based and optimized to run a lot of calculations, they told me. “It’s basically margin on demand and that sells well as clients can see 300k trade portfolios in realtime.” It can also perform optimization analysis to see what happens when a portfolio is optimized and customers can always see margin requirements as it develops in realtime. Currently, around a dozen clients are utilizing the platform after being in business two-years and starting to market the platform just a year ago. Currently, marketing has been all word of mouth. At the moment, Cumulus9 is keen to partner with complementary vendors in the space, they told me.
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