Current Uses of Computers in UK Business and Industry

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Current Uses of Computers in UK Business and
Industry

• Presentation to the Computer Sciences Course,
  University of Warwick
• by Simon Walkden
• Executive Director, Information Technology
• UBS Warburg

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Who Are UBS Warburg?

• UBS Warburg (www.ubswarburg.com) is the global
  investment banking, securities and wealth
  management business of UBS AG, one of the largest
  financial services organisations in the world.
  UBS Warburg specialises in delivering
  market-leading advisory, research, distribution
  and transaction execution services to corporate,
  institutional and private clients globally.
• UBS Warburg meets its clients' needs through six
  leading business areas corporate finance
  equities fixed income private banking private
  equity (through UBS Capital) treasury products.
• Well known for technical innovation, UBS
  Warburg's initiatives in connectivity, straight
  through processing and real time delivery include
  individualised online research, advisory and
  transaction services for institutional and
  private clients. In January 2000, UBS Warburg
  were joint lead managers on the first ever bond
  to be marketed and subscribed via the internet,
  using their DebtWeb facility, one of a suite of
  e-commerce sites developed entirely in-house.

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http//www.ubswarburg.com
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http//www.ubswarburg.com
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Investment Bank On Line
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Demand for Client Connectivity is Growing
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Raw Statistics

• 18,000 Full-Time Equivalent Employees
• 25,000 People engaged in an employment type
  relationship
• 50 Countries
• 23 Europe, Middle East and Africa
• 13 Asia Pacific
• 14 The Americas
• Headquarters is in London 6,000 FTEs
• Parent Bank is in Switzerland

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Immediate Implications for IT

• We have our own world-wide network
• Require an international language standard
  desktop, principally European but also Asian
  Languages
• Electronic mail, IRC chat and video
  communications over the network
• OpenMail, Interchange, Avistar
• Integration with travel services!
• IT must service remote working
• Core systems have to be multi-currency,
  multi-legal entity and sometimes multi-lingual
  (though the Banks standard is English)
• Global focus

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Managing the IT Factory

• 5,000 technologists
• 891,000 help desk calls
• 7,000 market data users
• 227 sites supported
• 3,000 major releases per year
• 41,500 client server devices
• 60,000 ports
• 2,000 hubs
• 400 routers
• 5,500 UNIX servers
• 1,800 NT servers
• 1,300 MIPS

• Availability management
• Monitoring and reporting
• Full unit pricing

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Distributed Computing Costs
Trends.xlsTrends?Chart 15

• In 2001 SCM Programme saved US15.2mm in capital
  spend and depreciation

SpecIntUnix MIP
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Out-sourced E-mail
September 24.XLSPage 11?Chart 1

• RTB costs will decrease from US20mm in 99 to
  US5.5mm in 2002 (for like for like services)
• A pilot Exchange 2000 infra has been installed
  and we are planning to complete the full
  migration by the end of Q1 2002
• Outsourcing arrangement is based on a unit cost
  with a downward sliding scale for additional
  volume as our demand increases

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UBSW Network Costs versus Bandwidth

• Cost / Bandwidth ratio is decreasing about 5 per
  month.
• Increasing demand for bandwidth due to
  applications with larger appetite for bandwidth
  plus migration of traffic from traditional
  carriers to internal network.
• Increased use of voice/data with UBSWNet saves
  additional money compared to traditional
  carriers, bandwidth efficiently shared.

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IBM Mainframes Consolidation
Drastically cuts total and unit costs while...
1999
2002

• 1000 MIPS Peak Utilization
• Old Technology in 4 LocationsLondon, Stamford,
  Singapore, Frankfurt
• Questionable Disaster Recovery

• 2000 MIPS Peak Utilization
• World Class Technology and Performance IBMs
  Z-900 Processors, EMCs 8700 Series Storage
• Solid Disaster Recovery

...migrated to world class technology
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The Last Decade of UBS Warburg
Swiss Bank Corporation
OConnor Associates
1993
Swiss Bank Corporation
SG Warburg
1995
Dillon Read
1997
Union Bank of Switzerland
1998
2000
PaineWebber
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The Implication of History on Computing

• IT Solutions can be amongst the reasons for
  acquisition (e.g. OConnor)
• You get to do a lot of systems integration work!
• Learn your end to end business processes and
  decide your solutions on that fit - otherwise the
  systems integration gets horrendous.
• You have to have all embracing technical
  standards, because somebody you acquire will have
  brought the technology in.

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The Business Constituents

• Equities, e.g.
• Securities (Stocks) Ordinary Shares, Preference
  Shares
• Convertible Bonds
• Derivatives Options, Warrants,
• and Research
• Fixed Income, e.g.
• Government Bonds
• Corporate Bonds
• Interest Rate Swaps ...
• Treasury Products, e.g.
• Foreign Exchange
• FX Options
• Overnight Money Markets ...

• Corporate Finance
• Mergers and Acquisitions
• Initial Public Offerings (IPOs)
• Leveraged Finance
• Private Equity
• Venture Capital
• Private Banking
• Wealthy Individuals

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Corporate Finance and Private Equity

• The impact of the Internet has altered the
  relationship between the IT Department and these
  Business Units
• Supplier (Conventional)
• supply a system that list major shareholders in
  UK listed companies
• Partner (New Opportunities)
• sell the application as a hosted service to
  listed companies in the UK
• create internet application for online
  application for new issues
• Advisor (New Economy)
• due diligence technology reviews on companies in
  which we invest capital and private equity
• give leads on small technology companies who are
  considering flotation (IPO)

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IRIS Application - Screen Shot One
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IRIS Application - Screen Shot Two
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IRIS System - Client-Server
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DealKey - Internet Application
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Investment Bank On Line
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DealKey - the Deal Board
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DealKey - Internal Sales Function
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DealKey - Specific Offering
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DealKey - Online Application for New Issue
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Equities, Fixed Income and Treasury Products

• Equities, Fixed Income and Treasury Products is
  execution business, rather than advisory business
  (cf Corporate Finance)
• The execution is an extended process from the
  order, through execution, through settlement, to
  booking
• Overriding requirement is to manage risk, as risk
  is where the Banks profits are made or lost
• Specialised business systems, working straight
  through.

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Straight Through Process
Sales and Order Systems
Trades
Risk Management Systems
Settlement Systems
Trades
Trade Valuation, Revaluation
Settlements
Aggregates
Risk Control Systems
Financial Control Systems
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Risk Systems
Sales and Order Systems
Trades
Risk Management Systems
Settlement Systems
Trades
Trade Valuation, Revaluation
Settlements
Aggregates
Risk Control Systems
Financial Control Systems
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Risk Management

• The price of shares can go down as well as up!
• In the course of servicing customers dealing in
  Stock, Bond and Money markets, UBS Warburg holds
  stocks of these products
• Risk management goes through, asset by asset, the
  impact of market fluctuations
• market movement calculations can be complex for
  synthetic and derivative products
• profits and losses arising from market daily
  movements are booked in the company accounts
• impact of market movements and trends in exposure
  are reviewed to influence proprietary trading
  activity
• balancing trades in the derivatives markets are
  made to hedge or offset risk
• Micro-level management of risk

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Risk Control

• Macro-level management of risk
• Alignment of the investment banks capital and
  policies to the overall risk profile
• It monitors
• market risk
• counterparty risk
• country risk
• settlement risk
• operational risk
• May introduce policy, e.g. limit trading over
  Year 2000 or in a specific developing country
  with internal monetary problems

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Risk Systems

• Risk systems are therefore based on
• internal position keeping element
• market price feed
• mathematical models
• reporting solution
• These are normally implemented on Sun Solaris
  servers.
• Models are highly specific to products, therefore
  the applications become distributed by product.
  Those models are set up on compute servers
  written in c or c.
• Companies such as Reuters and Bloomberg have
  traditional market pricing services based on Unix
  and IP communications
• Sybase DBMS is used for position keeping on the
  database server
• The Unix comms server, compute server and
  database server work together to provide the risk
  system.
• Windows client is used to look up results on the
  database server in a traditional client-server
  arrangement

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Settlement Systems
Sales and Order Systems
Trades
Risk Management Systems
Settlement Systems
Trades
Trade Valuation, Revaluation
Settlements
Aggregates
Risk Control Systems
Financial Control Systems
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Settlement Systems

• Record Trades
• Authoritative Statement of Settled and Unsettled
  Trades
• Trade Confirmation and Dispute Handling
• Settlement and Fails
• Handles Cash Flows through the Product Lifecycle
• Dividends on Shares
• Other Corporate Actions
• Interest Payments on Bonds or Swaps
• etc

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Settlement Systems

• Transaction-oriented functionality today
• Typically mainframe based - CICS and DB/2
  preferred
• Moving to workflow orientation
• Retaining mainframe orientation based on MQ
  series infrastructure and emerging products from
  IBM

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Custody and Collateral

• Stocks, Bonds and Cash may all be used for
  collateral purposes
• Custody of customers stocks, bonds and cash may
  also be used as collateral
• Each may be leant to short-term borrowers for a
  fee
• Overnight money market
• Stocks for short deals
• These systems lag behind in the globalisation of
  the investment banks processes and there is
  little consistency in the technology or
  applications used
• As this is being addressed, new applications are
  employing Java 2 Enterprise Environment framework
• Enterprise Java Beans for positions, lending
  offers and borrow requests
• Rendering through JSP and servlets

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Financial Systems

• Here we move into the back office world
• Looking to purchase commercial products to fulfil
  business need
• Enterprise Resource Planning (ERP) software
  dominates
• Users of SAP software
• SAP R/3 for financial accounting and management
  accounting
• SAP R/3 for inventory management
• SAP R/3 for projects, time recording and internal
  billing
• In 1997, investment bank had 42 different general
  ledger systems doing financial accounting and
  management. We have replaced 39 of these with a
  single instance global general ledger based on
  SAP R/3.
• Approximately 130 Business Systems Feed the
  General Ledger

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Financial Systems
Sales and Order Systems
Trades
Risk Management Systems
Settlement Systems
Trades
Trade Valuation, Revaluation
Settlements
Aggregates
Risk Control Systems
Financial Control Systems
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Global General Ledger System
Business Events
Accounting Entries
Rules Engine (Ac Posting Generator)
Static Data
Accounting Entries
Interface System (Ac Allocation/ Suspension)
Accounting Postings
Ledger (Balance Sheets Profit Centres)
Warehouse (Regulatory Reporting)
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Global General Ledger System

• Interface System - built in house Solaris and
  Sybase
• Rules Engine - from OST Business Rules with UBS
  sponsorship Unix and various DBMS and middleware
  adapters
• SAP R/3 - from SAP AG Sun Solaris multi-domain
  Enterprise 10000 and Oracle DBMS
• Warehouse - co-developed with PriceWaterhouse
  Coopers Sun Solaris E10000
• Availability Requirement
• Regulatory Reports must be submitted monthly in
  most countries and daily in the United States
• Daily Business Unit Balance Sheets required
• 4 Terrabytes Data

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Technical Infrastructure for Stored Data
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Questions and Answers

• Current Uses of Computers in UK Business and
  Industry

simon.walkden_at_ubsw.com