The duo will focus their efforts on an integrated, real-time, risk management solution for uncleared derivatives.
AcadiaSoft, a back-office collateral management services provider for uncleared derivatives, has acquired Quaternion Risk Management, a front-office, consulting and software provider, laying the groundwork for an integrated, real-time, risk management solution to come, officials say.
The transaction will bolster AcadiaSoft’s risk mitigation offerings and is a response to the industry demand for more standardized risk services, officials say.
“The coming together of our two firms comes at a crucial time for the derivatives industry,” Chris Walsh, CEO of AcadiaSoft, tells FTF News. “The obstacle the market faces to truly integrate the full trade lifecycle is breaking down the silos between the front office and its quantitative functions and back-office operational functions,” Walsh says.
“Historically, AcadiaSoft served the back-office operational functions, and Quaternion the front office,” Walsh says. “Our new team based in both Europe and North America bridges the front-to-back office divide and will solve problems across the industry in a way that’s never been possible until now. The acquisition provides a very powerful opportunity to integrate not just the trade lifecycle, but also to integrate the thinking across what has historically been two very different disciplines across the market.”
Prior to the official announcement, AcadiaSoft had already created a Quaternion division that will be run by Quaternion’s founders — Donal Gallagher, CEO, and Roland Lichters, chief technology officer (CTO). Quaternion’s headquarters are in Dublin, Ireland.
The new Expert Services division “will bring an experienced quantitative analyst team to the AcadiaSoft community, allowing clients to leverage domain expertise combined with a scalable product set,” Walsh adds. “As the industry strives for more centralized, standardized, and integrated risk management services, our clients will be able to leverage the Quaternion ORE open-source framework to enable greater adoption of market standard risk calculators supporting initiatives like SIMM, SA-CCR, XVA calculation, and other analytic services.”
Financial details about the transaction were not disclosed by AcadiaSoft.
“The sale price is commercially sensitive information that we will not be sharing, and this approach is consistent with how we’ve operated through previous deals,” Walsh says.
“What I can tell you is what we get as part of this acquisition. We get 30 of the top risk experts across the industry. We get the ability to price the vast majority of the OTC [over-the-counter] market with data that comes as part of this deal. We are concentrating on the value we can bring to the market; ultimately, this deal will translate into substantial savings for our clients,” Walsh says.
The acquisition is not expected to result in layoffs.
“We don’t expect so, as the two firms served distinct segments of the market,” Walsh says. “The Quaternion offices will remain in place and we’ll be able to leverage their Ireland and Germany presence to serve the broader AcadiaSoft community within these regions.”
Previously, AcadiaSoft partnered with Quaternion to offer risk mitigation and management offerings, Walsh notes. The two vendors worked together on the IM Risk Generator, IM Backtesting and Benchmarking, and CSA Valuation Service offerings.
“We’ve had a strong partnership with Quaternion for a number of years now, and we are constantly evolving and seeking new ways to help our clients navigate and meet regulatory demands. Acquiring Quaternion helps us do just that,” Walsh says. “We are now looking beyond the Uncleared Margin Rules [UMR] to the next biggest push for the derivatives industry — and that’s overall risk management. Quaternion is a natural partner for this. Our acquisition of Quaternion sets the stage for a new era of risk management in derivatives trading. We are in the midst of an industry transformation away from day-to-day risk mitigation toward a more continuous quantitative risk-based process.”
AcadiaSoft offers an industry-wide repository of margin and collateral data to helps firms mitigate financial risk and optimize resources across the life cycle of an uncleared transaction, officials say. Based in Norwell, Mass, AcadiaSoft has offices in Boston, Dublin, Dusseldorf, London, New York, and Tokyo.