Enhancing Mortgage Trading Revenue and Market Share by Integrating Digital Tools

Engagement Summary

Monticello Consulting Group (MCG) was engaged by a leading global bank to oversee the implementation of eTrading tools on its Non-Agency Mortgage-Backed Securities desk. This addition of cutting-edge digital tools and new data sources to one of Wall Street’s top Mortgage Trading desks enabled traders to identify and act on a greater number of trading opportunities. By building the tools to harness additional sources of market data and streamline lengthy manual trading processes into a quick automated solution, the desk was able to greatly increase the productivity of its traders, aiding both market share and revenue.

MCG managed the project from initiation through to completion: developing project timelines; managing delivery and communications; and identifying and documenting dependencies, risks, issues, and accomplishments. By working closely with both development teams and traders, Monticello was able to enable a smooth transition to the future state. Monticello’s expertise in complex financial products, project management, digital transformation and Agile methodology were key to the success of this strategic initiative.

Fig 1. Current State and Future State

Case Study Detail

PROJECT BACKGROUND

Mortgage-Backed Securities (MBS) trading is a highly manual process, particularly in the Non-Agency space where bonds are backed by mortgages that fail to qualify for agency backing and are therefore much more heterogeneous than in the larger Agency-Backed market. A typical process involves a buyer calling or emailing a dealer asking for a quote, the trader then checking his inventory, looking upmarket data manually, inputting it into a pricing model (often run via spreadsheet), then copy the output to a new message to reply. A typical trader involved in making markets may only be able to respond to a handful of buyer inquiries per day.

Likewise, automating MBS trading is more complicated than many other fixed-income securities, given the number of variables in the pricing model which themselves require models to determine (such as prepayment risk). These models are also more frequently updated as economic and market conditions change, requiring a flexible and seamless integration process with trading tools. 

Our client was looking to expand their MBS market-making business by implementing new tools across their Mortgage desks to enable automation and integration of this process. The goal was to improve productivity and reduce the potential for errors to allow traders to execute more trades while reducing operational risk. In addition, the desk wanted to integrate additional market data feeds from FINRA into their data visualization software to better identify trading opportunities. They expect total revenue growth of $3M over three years following completion of the multi-year program across all desks. MCG was contracted to manage the rollout of these tools to the Non-Agency MBS desk.  

ENGAGEMENT OBJECTIVES

Program Management

Implemented a project management structure to facilitate effective communication across key project teams, manage project scope, and track progress.

1. Determined project timeline in accordance with resource constraints, external dependencies, and commitments to senior management

2. Managed execution through clear communications, detailed progress tracking, and effective problem-solving

3. Documented and escalated all risks, issues, and dependencies as required

Digital Transformation

Helped development team deliver cutting-edge technology tools to transform and automate the Non-Agency MBS trading process.

1. Ensured complete understanding of dependencies and system requirements prior to the start of implementation

2. Verified that testing plan was robust and complete to ensure the system was functional, reliable, and secure

Agile

Enabled development team to follow Agile model of delivering working code, then prioritize features and fixes based on feedback from end-users.

1. Managed process of continuous delivery and updates to working production software and tracked changes to planning as feedback was received from end-users

2. Tracked project delivery through Agile tools (Jira) to ensure that all stakeholders had up to date information on current progress and priorities

BUSINESS VALUE

The Monticello team applied expertise in project management, digital transformation, Agile delivery and MBS product knowledge to ensure a seamless implementation. The team was able to quickly get up to speed given their extensive experience with trading technology and technology integration. By facilitating communication between stakeholders and efficiently managing the software delivery lifecycle, the team helped the client achieve their goals in increasing trader productivity, reducing operational risk and supporting a strategic digital transition of the MBS trading desk.

SKILLS & KNOWLEDGE (Level of Difficulty)

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Ensuring Client Protection for Broker Dealers in Latin America

Engagement Summary

In late-2020, Monticello Consulting Group (Monticello) patent with the Business Control team at a leading U.S. financial institution to conduct an end2end assessment of the Latin America (LATAM) business to ensure operational compliance with relevant jurisdictional client protection rules. This program was initiated by the client to determine whether their affiliate LATAM entities should be onboarded into the greater global client protection program which would bring forth additional governance and standardization of practices across all regions involved. The goal was to perform a deep-dive analysis to identify areas of non-compliance and/or weakness in controls, propose solutions to address gaps, and determine whether the risk and impacts identified warrant the respective LATAM entities to be included in the Global Client Protection Program.

The Monticello team was brought in to establish and lead a program structure to ensure alignment with global compliance. The Monticello team introduced a three-pronged approach to drive success:

• Definition and Planning - Reviewed the scope of applicable entities in LATAM to assess risk. Additionally, the team identified key processes and associated stakeholders from applicable process owners.

• Review and Assessment - Partnered cross-functionally with the regional regulatory, compliance, and legal team to identify all relevant client protection regulations. Using the in-scope regulations as the foundation for our end-to-end review, the team held deep-dive review sessions with process stakeholders to align processes against regulatory requirements.

• Proposed Solutions - The team presented their key findings back out to the greater global client protection program which outlined the areas of weakness or non-compliance, categorized them into the process or tech-aligned enhancements, and established a remediation plan to address and mitigate these gaps.

The region proved challenging due to incongruent procedures and data gaps. Monticello’s Financial Services Advisory team brought the requisite industry expertise, frameworks, stakeholder management, and leadership skills to achieve the client’s ambitious timeline.

Case Study Detail

PROJECT BACKGROUND

Client protection rules are a top priority for any broker entity and require a registered broker to protect and maintain custody of client assets and safeguard client money. In addition, the rules require the broker to segregate the firm’s proprietary assets from client assets to prevent improper use. Although regulations vary across regions, there are benefits through the standardization of common practices and alignment to a global approach in the handling of certain processes such as onboarding, treatment of segregated accounts, and client assets/money protection. For these reasons, the Global Client Protection Program extended its scope into LATAM to determine whether there is a business need to incorporate these entities based on their overall risk and impact.  

ENGAGEMENT OBJECTIVES

Program Management

Implemented a program governance structure for a large global bank and managed the overall program plan, deliverables, and timeline. Coordinated with key stakeholders across finance and operations to align and reconcile their process, risks, and controls with jurisdictional regulatory requirements.

1. Created program management templates used to monitor the progression and status of each key-process throughout the various phases within the program

2. Identified key risk areas where there were insufficient client asset controls in place and created high-level process flows to pinpoint areas of weakness or non-compliance

3. Ensured stakeholder engagement and buy-in for proposed recommendations and downstream changes to their underlying operational model

Financial Risk and Control

Reviewed jurisdictional regulatory requirements and implement business controls. Analyzed existing business model, identified opportunities for improvements, and proposed solutions to address key risks.

1. Partnered with the legal and regulatory team to conduct a full assessment of how the regulation governs the opening of segregated accounts, client asset segregation, and client money calculation processes

2. Created a standardized process inventory tool to reconcile the regulatory requirements with the individual process currently in place to achieve compliance

BUSINESS VALUE

Monticello Consulting Group is a trusted partner serving the financial services industry with a consistent track record of helping clients reduce their regulatory risks while improving operational efficiencies. By working with our client to successfully translate complex global regulatory requirements into effective business solutions, Monticello implemented the necessary risk and control framework to ensure compliance in LATAM. Monticello brought to this complex initiative by providing the client with the necessary leadership in both stakeholder and program management to lead this program to completion. Our team conveyed strong governance standards, regulatory knowledge, and end-to-end process understanding to ensure effective change management while meeting the client’s strategic objectives.

SKILLS & KNOWLEDGE (Level of Difficulty)

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Enhancing Business Controls for Surveillance Data at a Leading US Bank

Engagement Summary

As a result of an internal audit, our client’s equities and fixed income technology groups recognized that their applications that send trade data to surveillance systems lacked data completeness, defined SLAs, and sufficient monitoring and escalation protocols. As a result, first and second line of defense trade alerts were at risk of delay and not aligned with internal policies or external regulations. Monticello’s Financial Services Advisory and Change Management practice areas were brought in to lead the program and eliminate the gaps that existed in the legacy controls to ensure compliance.

The Monticello team performed an assessment of the current state and developed a strategic roadmap that aligned people, process, and technology. The team provided project governance and implementation support that allowed the client to meet regulatory and internal deadlines for the complex global stakeholder initiative. A key factor in the project’s success was the team’s prior experience collaborating with project partners across multiple geographies and their experience with the complex system landscape. By leveraging their capital markets, trade surveillance, and technological domain knowledge, Monticello was able to quickly assess the situation and make recommendations based on industry accepted best practices. In conjunction with the client’s SMEs, Monticello was also able to define and implement solutions on time, on budget, and in a manner that considered the future state landscape – ensuring that the solution was able to handle new systems and products as they are rolled out in the years to come.

Case Study Detail

PROJECT BACKGROUND

In today’s data driven world, financial institutions are monitoring trading activities on more markets than ever before, which in turn requires enhanced visibility across multiple trading venues, sources, and asset classes as the pool of data grows exponentially. Along with this growth comes greater scrutiny from regulatory authorities who apply systematic controls and surveillance procedures to ensure compliance.

As a result of an internal audit, our client identified an issue centered around data completeness within their surveillance data repository during periods of enhanced trade volume which was initially uncovered during the Covid-19 pandemic induced trading craze. Given the vast number of systems, geographies, and jurisdictions involved, it was determined that a current state assessment was required.  This would include a review of the fixed income, currencies, commodities and equities applications that send trade data to internal supervision and surveillance systems to clearly map the existing controls, review for adequacy, identify areas of weakness, and define enhancements and solutions.  Once implemented, the bank could ensure confidence that their surveillance monitoring models are complete, accurate, and future-proof.  

ENGAGEMENT OBJECTIVES

Program Management

Actively engaged stakeholders from 50+ teams and implemented a scope management plan and associated work breakdown structure for applications within the realm of the asset classes outlined for this program.

• Managed and communicated overall project goals and objectives with the technology owners of the 50+ applications in scope.  Collaborated on the timelines, benefits, and format of the program rollout to ensure stakeholder engagement.

• Developed KPIs and reporting metrics for executive management communications.

• Addressed and escalated risks at the earliest possible point while attaining necessary sign-offs required for completion of audit remediation.

Data Management & Analytics

Designed application analysis templates to capture the current state of the client’s system architecture.

• Documented data flows utilizing Visio to illustrate the data journey from source/origination, enrichment, and through to the surveillance applications along with each associated hand off point along the way.

• Created matrices to easily provide visual summaries of gaps identified and trends across the system landscape.

• Created a centralized SharePoint to manage the document store, reporting process, and to provide automated program and workstream level RAG status.

BUSINESS VALUE

Monticello Consulting Group is a trusted partner serving the financial services industry with a consistent track record of helping clients reduce their regulatory risks while improving operational efficiencies. By working with our client to successfully translate complex regulatory requirements into effective business solutions, the Monticello team implemented the risk management and technical controls to ensure trading and system of record applications were robust. The Monticello team partnered with the owners of approximately 50 applications across 5 business areas to identify issues for remediation.  Monticello utilized our proven Agile project management and project governance approach that allowed the client to roll out solutions faster and with quality resulting in significant time and cost savings.

SKILLS & KNOWLEDGE (Level of Difficulty)

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Transforming the Software Delivery Lifecycle through Agile

Engagement Summary

In mid-2020, Monticello Consulting Group (Monticello) partnered with a front-office trading technology team at a leading U.S. financial institution to devise and implement a change management strategy to facilitate the adoption of Agile and transform the overall software delivery process. The goal of the program was to create an efficient and centralized software delivery approach and transform the software lifecycle to meet critical and immediate business requirements set forth by the front-office.

The Monticello team developed the strategy and brought the necessary expertise, program management, and leadership to meet global stakeholder needs and an ambitious timeline for a successful implementation. The Monticello team, along with Agile project management coaches and automation experts partnered cross-functionally with business and technology groups to strategically prioritize high-impact areas for improvements. Monticello created a new strategic roadmap and established best practices taking into consideration existing challenges faced by the development teams, ongoing resource constraints, and changing business needs. By identifying bottlenecks and remediating roadblocks, Monticello was able to reduce turnaround time and improve implementation quality.

Finally, the team ensured that the strategy also incorporated automated data management to provide clear and insightful KPIs to all stakeholders including the senior leadership team in order to monitor progress and facilitate more efficient decision making. The team leveraged the Jira platform to streamline the end-to-end software delivery process, reduce routines and cycle times, eliminate redundancy, and improve the development team’s employee satisfaction. Additionally, Monticello redesigned the client’s software delivery progress reporting. By defining robust Jira labeling standards, the team was able to create a dashboard within Jira to provide real-time insights and periodic business intelligence needed to spot trends, mitigate risks, and make informed decisions.

Agile Transformation using Jira Software

Case Study Detail

PROJECT BACKGROUND

Managing and maintaining a fluid software delivery lifecycle enables clients to optimize resource allocation, reduce costs, align strategic priorities, and accurately forecast future business needs. Over time, our client’s project management approach had become less Agile and the software delivery lifecycle was ineffective due to the manual, inconsistent, and disjointed processes. There was a clear business need to centralize and streamline the development process, establish Agile best practices, and obtain timely and critical insights via a robust and automated reporting dashboard to enable effective leadership decision making. By incorporating Scrum Agile in the software delivery lifecycle, Monticello helped eliminate inefficiency, reduce costs, and accelerate product delivery by removing complexity and providing a standardized approach in line with the industry’s best practices.

ENGAGEMENT OBJECTIVES

Agile

Implemented a standardized project management approach to align with Scrum Agile project management best practices for software delivery, project execution, and enhanced metric development for transparent and effective communication and decision-making.

1. Worked with technology partners, developers, and business users to develop a strategy for implementing Scrum Agile project management along with its best practices to deliver new product features

2. Liaised with Agile coaches for gap analysis to streamline and automate processes

3. Supported development team through effective communication and feedback loops for execution

Data Management & Analytics

Drove tangible business outcomes through intelligent capture, analysis, and reporting of Key Performance Indicators (KPIs).

1. Established Scrum Agile routines such as Product Backlog grooming for development teams as per industry best practices

2. Defined structure & labeling standards for Jira tickets to provide clear insights in development work and accelerate defect resolution

3. Created a centralized Jira reporting dashboard to provide an automated program and workstream level metrics for accurate planning

4. Developed KPIs such as burn-up charts, burn-down charts, velocity charts, and other reporting metrics for management communications

5. Addressed and escalated risks and issues while attaining necessary sign-offs required for completion of documentation and processes

BUSINESS VALUE

Monticello collaborated to induce an Agile mindset and develop an efficient software delivery lifecycle to enhance and transform the client’s experience. By leveraging our subject matter expertise, program and project management toolkit, and data management and visualization capabilities, Monticello ensured the strategy was adopted across all the technology teams while simultaneously providing more robust insights reflecting increased efficiency and overall developer satisfaction to the senior leadership team.

SKILLS & KNOWLEDGE (Level of Difficulty)

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Driving Efficiency in Client Onboarding Through Standardization and Automation

Engagement Summary

In late-2019, Monticello Consulting Group (Monticello) partnered with the change management team at a leading U.S. financial institution to support the strategy and operations of a new client onboarding program. This program was initiated by the client to consolidate and standardize their previously disjointed and highly manual onboarding processes. The goal was to create an efficient and centralized core platform to be used globally across the organization. The Monticello team was brought in midway through the three-year implementation in order to enhance the strategy and drive the project to a timely completion.  The team provided the client with the necessary leadership and program management to achieve their ambitious timeline and meet global stakeholder needs for a successful implementation. The Monticello team created and delivered a revised strategic roadmap, taking into consideration changing business and regulatory needs. Next, the team leveraged their client onboarding expertise to ensure a quality implementation and that all stakeholder needs were properly assessed. Finally, the team ensured that the data management aspect of the program was designed to provide stakeholders and senior leadership teams with clear and insightful KPIs in order to facilitate more efficient decision making in the years to come.

In order to ensure that the client onboarding platform was being efficiently utilized, the Monticello change management team, operations excellence, and automation experts partnered cross-functionally with business and technology groups to strategically prioritize high impact areas for improvements. The team recommended and implemented automation to streamline the end-to-end process, reduce onboarding cycle times, and improve customer satisfaction. In conjunction, the team enhanced existing proprietary applications within the bank to ensure connectivity between all platforms and downstream systems.

Front-to-Back Client Onboarding Workflow

Monticello’s focus was also to redesign the client onboarding program’s manual reporting process. By defining robust JIRA labeling standards, the team was able to create a dashboard within JIRA to provide real-time insights and business intelligence needed to spot trends, mitigate risks, and make informed decisions.

Case Study Detail

PROJECT BACKGROUND

Client onboarding is the process by which a financial institution introduces new clients to its business. Onboarding is a complex and time-consuming process that involves negotiations and agreements, account setup, and regulatory compliance with Anti-Money Laundering, Know Your Customer, and the Foreign Account Tax Compliance Act (FATCA). The onboarding process is unique to the client’s needs and the country specific regulations which add significant complexity and time to the onboarding process. Over time, our client’s processes became disjointed and inconsistent due to the highly manual nature of the process that were in place. There was a clear business need to centralize and streamline the process, accelerate client onboarding times, and meet regulatory mandates. A robust global dashboard was also required to support leadership decision making.

ENGAGEMENT OBJECTIVES

Program Management

Implemented a customized governance model to align program and project execution with business objectives and enhanced metric development for transparent and effective communication and decision-making.

1. Worked with business owners and users to develop strategy and business cases for new product features

2. Liaised with stakeholders to gather business and functional requirements for streamlining and automating business processes

3. Supported release management including end-to-end go-live planning, testing, and execution

Data Management & Analytics

Drove tangible business outcomes through intelligent capture, analysis, and reporting of Key Performance Indicators (KPIs).

1. Defined labeling standards for JIRA tickets to provide clear insights in development work and defect resolution

2. Created a centralized JIRA dashboard to replace the manual reporting process and provide automated program and workstream level metrics

3. Developed KPIs and reporting metrics for management communications. Addressed and escalated risks and issues while attaining necessary sign-offs required for completion of documentation and processes

BUSINESS VALUE

Monticello Consulting Group provides services across the financial services industry to collaborate with business and technology to reduce costs, manage risks and seize growth opportunities. By working with clients to understand the complex nature of client onboarding and assess the impact it has on both existing and new business models, Monticello enables clients to target the pain points with the highest return on investment. Our team partnered with onboarding managers, reference data teams and technology to develop business requirements and oversee the end-to-end implementations of enhancements to the new client onboarding platform. By leveraging our client onboarding subject matter expertise, program and project management toolkit, and data management and visualization capabilities, Monticello ensured the platform was adopted across all lines of business globally while simultaneously providing more robust insights into program health to the senior leadership team. Most importantly, the client experience was enhanced and transformed as onboarding volumes increased 28% and cycle times were reduced by 47%.

SKILLS & KNOWLEDGE (Level of Difficulty)

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Remediation of Trade Recordkeeping related OCC MRA for a major US bank

Engagement Summary

Monticello Consulting Group (Monticello) partnered with a leading US bank to resolve a Matter Requiring Attention (MRA) issued by the Office of the Comptroller of the Currency related to incomplete trade reporting on US Government securities. The MRA was in relation of the SEC CFR § 12.3 – Recordkeeping requirements[1]. The goal of this engagement was to:

• Assess the trading activities in scope of this MRA

• Perform forensic data analysis for three-year trading activity

• Identify any trade recordkeeping shortcomings in the trade booking systems and related business operations

• Partner with bank’s risk, legal, and compliance team to provide remediation plan to OCC

• Oversee gap remediation and validate trade recordkeeping to achieve MRA compliance

Monticello was tasked to assist our client to demonstrate to regulators that all recordkeeping gaps were identified and remediated in a timely fashion. Monticello consultants leveraged their deep regulatory and change management expertise to lead the operations and technology enhancements required to comply with the regulatory requirements ahead of the compliance deadline.

The Monticello team designed a program governance structure that supported multiple workstreams comprised of legal and compliance leads, agile scrum delivery teams, developers, testing teams, and operational and business process owners. Additionally, Monticello supported senior leadership and program sponsors by providing continuous program status updates to the program’s Steering Committee and other critical stakeholders and decision makers.

Case Study Detail

PROJECT BACKGROUND

SEC CFR § 12.3 – Recordkeeping requires a government security dealer to maintain a chronological reporting of all cash and derivatives trading activity, including all economic trade details, over a three-year period. The dealer should also provide trade confirms, affirmation, customer accounts and all affiliate dealers as required in compliance with the rule. In this particular case, the large US bank had grown significantly through mergers and acquisitions over many years, and had multiple trade capture systems and operational processes that lacked the central controls to ensure record keeping and data quality standards expected by the regulatory agencies.

ENGAGEMENT OBJECTIVES

Data Forensics, Program Management & Governance

Built and managed OCC MRA program governance under Corporate Compliance and Fixed Income Trade Control group for the Global Banking Organization. Monticello contributed towards the design of the Program Management Office (PMO) to ensure all transformation and changes delivered as per the regulatory MRA mandates. The PMO structure included the following:

• Define program workstreams, reporting routines, and ongoing program governance based on regulatory requirements and alignment with business needs.

• Identify and manage program assumptions, key issues/risks and internal/external critical dependencies.

• Data forensic analysis to identify all gaps in existing processes/operations and systems, and build a strategy for gap remediation.

• Ensure adherence to overall enterprise change management standards.

• Ensure stakeholder engagement and buy-in

Management Communications & Reporting

Developed a strategic communications plan to provide critical updates to stakeholders in a timely fashion. The communication plan established audience, communication objective, and channel of delivery. Critical information was summarized in a dashboard that communicated regulatory updates, program status and key risks, issues and dependencies. In addition, the PMO defined key program metrics to facilitate the decision-making process of senior program executives.

BUSINESS VALUE

Monticello Consulting Group provides services across the financial services industry to ensure compliance and reduce regulatory risks. By working with clients to successfully translate complex regulatory requirements into effective business solutions, Monticello enables clients to implement the necessary risk and control framework to ensure industry challenges are turned into opportunities. Our team partners with cross-organizational client teams and oversees the end-to-end execution for MRA remediation. By leveraging our regulatory knowledge, change management expertise, and proven governance standards, Monticello successfully ensures global trading activity is not disrupted while undergoing a business-critical regulatory change.

SKILLS & KNOWLEDGE (Level of Difficulty)

[1] 12 CFR § Recordkeeping for National Banks effecting securities transactions for customers.

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Raising the Bar for Broker-Dealer Standards of Conduct Through Regulation Best Interest

Engagement Summary

In early 2020, Monticello Consulting Group partnered with the regulatory compliance function within the capital markets unit at a leading bank on their Regulation Best Interest (Reg BI) program. The goal of the engagement was to enhance the standard of conduct for investment recommendations to retail customers by broker-dealers and their registered representatives ensuring that broker dealers act in the “best interest” of their retail customers.  Monticello were tasked with demonstrating to the regulator that the bank’s broker-dealer function has a reasonable basis to believe that recommendations are made in the retail customer’s best interest. In order to satisfy this regulator’s request, the broker-dealer was to comply with this overarching obligation and its four component parts:

Disclosure Obligation - Prior to or at the time of a recommendation, the broker-dealer must provide the retail customer, in writing, with a full and fair disclosure of the scope and terms of the relationship, the capacity in which the broker dealer is acting, the fees and costs associated with the services provided, as well as all material facts relating to conflicts of interest associated with the recommendation.

Duty of Care Obligation - The broker-dealer must understand the risks, rewards, and costs associated with the recommendation and exercise reasonable diligence, care, and skill when making the recommendation. In an enhancement to FINRA’s Suitability Rule, which only considers the ‘suitability’ of a given recommendation, the care obligation goes further and ensures that the recommendation is made in the customer’s best interest and the broker-dealer does not place their own interests ahead of the retail investor. If the implementation of this obligation proves successful, FINRA’s Suitability Rule may soon become redundant.

Conflict of Interest Obligation - A conflict of interest is defined as an interest that might incline a broker-dealer, consciously or unconsciously, to make a recommendation that is not disinterested. The Conflict of Interest Obligation requires the establishment of policies and procedures designed to mitigate, prevent, or eliminate conflicts of interest that may create an incentive for a broker-dealer to place their interest above that of the retail customer.

Compliance Obligation - Tackling Reg BI as a whole, the broker-dealer has an obligation to establish, maintain, and enforce policies and procedures that address all components of the regulation and aid compliance with the rule.

Case Study Detail

PROJECT BACKGROUND

The establishment of Regulation Best Interest marked a major milestone for the SEC in their efforts to raise the standard of conduct for broker-dealers. Reg BI was adopted by the SEC on June 5, 2019 (and went into effect starting on June 30, 2020) and will significantly enhance protection for U.S. retail customers, or “two-legged individuals”, who receive recommendations from broker-dealers for the purposes of managing personal, family, or household wealth. Reg BI was designed to place investor interests ahead of the profit motivation of broker-dealers and registered investment advisers. As simple as that principle may sound, there is ample evidence to suggest that broker-dealers and those in investment advisory roles are not fully aware of the obligations they owe retail investors. At the same time, many retail investors are not sufficiently familiar with the standards, conduct, and fiduciary responsibilities their investment advisors are required to follow to protect their interests. Reg BI is centered on fairness and transparency for individual investors, which continues to be an ongoing priority for the SEC.

ENGAGEMENT OBJECTIVES

Change Management

In preparation for a go-live just five months after Monticello started on the engagement, the Monticello team created and managed the overall implementation plan, scope, deliverables, and timeline for the Reg BI program. Partnering cross-functionally with business and technology groups to create a set of new and revised policies and procedures that met the four component obligations of the rule, Monticello ensured the client successfully met its compliance requirements.

Financial Services Advisory

Monticello’s wealth of regulatory and compliance experience combined with its deep technical expertise facilitated the fast-paced development of reports to systematically capture in-scope clients and target counterparty remediation in line with guidance from the SEC. In parallel, the team worked closely with the bank’s FICC and Equities Client Onboarding function to develop a brand new Customer Relationship Summary (CRS) that the SEC required each broker dealer to deliver to retail customers, disclosing summary information about the firm: a “Form CRS”. 

BUSINESS VALUE

Monticello Consulting Group provides services across the financial services industry to ensure compliance and reduce regulatory risks. By working with clients to successfully translate complex regulatory requirements into effective business solutions, Monticello enables clients to implement the necessary risk and control framework to ensure industry challenges are turned into opportunities. Our team partnered with Business, Legal, Technology, and Sales & Trading to develop business requirements and oversee the end-to-end execution of a policy and procedure revision and a client onboarding enhancement for the Reg BI program. By leveraging our regulatory knowledge, project management expertise, and proven governance standards, Monticello successfully ensured global trading activity was undisrupted while undergoing a business-critical regulatory initiative.

SKILLS & KNOWLEDGE (Level of Difficulty)

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Achieving Operational Readiness for a Large-Scale Technology Transformation

Engagement Summary

In late 2019, Monticello Consulting Group partnered with the collateral unit at a leading global bank on the operational readiness portion of their OTC bilateral client migration project. The engagement aimed to address the key issues around achieving operational readiness for a global technology transformation. Monticello had multiple responsibilities on this project including: 1) provide program and project management on multiple workstreams, including creation and coordination of end-to-end testing 2) rewrite global procedures, and 3) develop and implement a new cross-region training platform.  Through sound planning, testing, and training, Monticello ensured that users across the globe were operationally ready for the transition to their new global platform.

Case Study Detail

PROJECT BACKGROUND

In early 2019, a leading bank planned to transform the technology used by their global OTC Collateral Operations unit. The plan was to migrate all core collateral functionalities that supported the OTC client population from the legacy platform onto a new proprietary system. The existing proprietary platform had become outdated and needed replacement by a solution capable of supporting growth and the ever-changing regulatory environment.

To prepare a global team across multiple regions and time zones, the client needed to set up an end-to-end testing plan that would ensure all scenarios are covered, regardless of geography. To stay compliant with internal Operational Risk and Control standards, all procedures needed to be updated to reflect the detailed workflows in the target state. Making sure that the procedures are applicable on a global level, without unique regional procedures, was a priority. To distribute the knowledge of the new system, a training program needed to be developed and rolled out globally to more than one hundred users.

ENGAGEMENT OBJECTIVES

E2E Testing:

The end-to-end testing plan validated scenarios from margin call calculation though issuance, settlement, and next day.

1. All relevant scenarios were documented, accounting for exception handling, and test scripts written

2. Testing included regression testing of legacy platform

3. Day over day testing to validate call and pledge status and that balances are accurate from EOD to SOD

Procedures Documentation:

Created procedures documentation for hundreds of new processes being completed out of the target system.

1. Reduced volume of OTC Collateral procedures and eliminated regional procedures

2. Followed firmwide procedures guidelines implemented by internal Operational Risk and Control team

3. Centralized documentation and made available to all users to be used as a resource and training supplement

Training Platform & Plan:

Developed new training process to ensure a smooth transition from legacy workflow applications to the target workflow.

1. Goal - to get users comfortable with the new system before go-live dates and to minimize the learning curve

2. Video software simulations were created to walk a user through various parts of the margin call workflow

3. Plan included live training sessions, self-guided sessions, as well as an attestation of competency

BUSINESS VALUE

Monticello Consulting Group’s Change Management team partnered with the client’s operations experts and development resources to build a well thought out plan to ensure operational readiness for an exceptionally large technology transformation. Monticello’s Change Management expertise helped all stakeholders understand and implement the complex business requirements that encompassed the entire OTC margin workflow including call issuance, pledge booking, approvals, settlements, and internal and client reporting. End-to-end testing ensured that all workflow issues were identified prior to go-live. By creating updated global procedures and a comprehensive training plan, the users across the globe were ready for the change to a new target workflow and Monticello’s client achieved operational readiness for the transition to their new global platform.

SKILLS & KNOWLEDGE (Level of Difficulty)

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Enabling Transformation & Change: Technology Change Standards and Communications

Engagement Summary

Monticello Consulting Group was engaged by a Fortune 500 banking institution to streamline the adoption of technology change standards, improve internal communications, and facilitate external reporting. Financial market participants must adhere to high quality standards when executing critical technology programs. Regulatory agencies are not only concerned with operational risk in the adoption of new technologies, but also want to ensure that critical legacy applications are changed following a strict and controlled process.

The Monticello team was tasked with the development of best-practice change standards. The standards provide change program teams with guidelines in three fundamental pillars: Adoption, Reporting and Training, as illustrated in Exhibit 1. Monticello started this engagement by establishing adoption metrics that drive high quality deliverable standards. As a next step, our team established a robust reporting framework that supported the monitoring and communication of program conditions and status. Many of the reports were automated to improve overall program efficiency. Lastly, the team assembled a knowledge base of reusable job aids and reference documentation to ensure that change teams adhere to consistent implementation standards.

Exhibit 1

Case Study Detail

PROJECT BACKGROUND

The OCC (Office of the Comptroller of the Currency) ensures banks regulated in the United States operate in a safe and sound manner. Our client, subject to a Matters Requiring Attention (MRA) notice from the OCC regarding technology processes and delivery controls, established enhanced technology change policies and standards. Monticello’s Change Management and Financial Services Advisory Team was brought in to support multiple technology teams within fixed income sales and trading. Our clients include technology leaders and executives who are working very closely with their front office business partners. Our mandate was to empower and upskill their program managers and technology team leaders to arm them with the capabilities to efficiently plan and execute while adhering to critical standards.

ENGAGEMENT OBJECTIVES

Change Standards Adoption:

• Monticello developed a change standards tracker containing over 1,500 data points spanning 10 delivery programs, and 50 sub-projects representing over $55M in technology investments. Automated tool helped eliminate delivery delays and compliance breaches.

• Internal quality assurance reviews and audits were conducted regularly.  Weekly Readiness Reports served as an early indicator of success or failure by grading over 80 controls per program.

Communications & Reporting:

• Monticello developed technology performance reports and standardized the output with intuitive metrics that allowed traders to quickly evaluate overnight processes and completion status.

• Monticello automated management reporting by using code to transform raw data into summary decks for daily and weekly executive reviews. Additional reports aimed at improving planning accuracy were semi-automated into emails directed towards technology leaders on a weekly basis to accelerate planning decision making.

• Using Tableau™ software, Monticello’s Data Visualization Team developed and released strategic and actionable reports to technology leaders and executives pertaining to code releases success rates.

Training & Skill Building:

• Paramount to our services is Monticello’s deep understanding of change standards and our ability to transfer that knowledge to program and project managers in a consumable way. We created job aids through SharePoint™, Wikis, artifacts such as templates and samples, and led weekly touchpoints to provide timely and clear guidance.

• Additionally, Monticello’s team helped prepare the organization for external audits.

BUSINESS VALUE

Monticello Consulting Group is a leader in change management and digital transformation. Our team of highly skilled consultants has extensive experience introducing change to organizations through the use of technology. By leveraging our proven methodologies, we successfully supported the adoption of enterprise technology change standards that ensure compliance, lowered operational risk, and achieved 98% on-time deliveries.

SKILLS & KNOWLEDGE (Level of Difficulty)

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US QFC Stay: Implementing Technology Solutions for Complex Regulatory Mandates

Engagement Summary

In late-2018, Monticello Consulting Group (Monticello) partnered with the regulatory compliance within the capital markets unit at a leading bank on the U.S. QFC STAY project. This engagement aimed at addressing the key regulatory challenges and creating a governance process focused on structuring remediation efforts for counterparties with in-scope Qualified Financial Contracts (QFCs). Monticello’s engagement on this project was multifaceted; provide advisory on translating complex regulatory requirements into technological solutions, manage and deliver the end-to-end execution of a risk and control process across sales and trading units, and provide stakeholders and senior leadership teams a clear remediation strategy for key risks and issues.

In preparation for the go-live initiative for U.S. QFC Stay, Monticello partnered cross-functionally with business and technology groups to create a consolidated report that systematically captured counterparties that are in-scope for the regulation to determine the population and assess the counterparty-risk. In conjunction, the team enhanced existing proprietary applications within the capital markets unit with relevant U.S. QFC Stay information to ensure connectivity between all platforms and downstream systems. Throughout the initial business gathering and requirement phase, Monticello was able to successfully manage and coordinate the release management process across multiple departments.

Once the first regulatory phase-in date for U.S. Global Systematically Important Banks (GSIBs) passed, Monticello’s focus shifted to creating a defined governance structure to effectively track and monitor regulatory risk globally across Sales & Trading. The creation of the Post Trade Reporting (PTR) process enabled senior leadership to gain visibility and insight into i) non-compliant trades with clients ii) business requirement gaps and refinement required iii) outstanding notional exposure and counterparty risk. As the regulation continued and scope of counterparties widened, our team was responsible for redesigning the existing process to capsulate all new business requirements. By continuously improving the PTR process through the course of the regulation, Monticello was able to keep up with the changing expectations from the business to deliver a robust and effective risk and control process. This became the standard operating procedure for the bank and was quickly adopted into business as usual activities.

Case Study Detail

PROJECT BACKGROUND

In response to the 2008 financial crisis and the economic collapse that followed, the U.S. banking regulators have adopted laws and regulations to employ a more orderly resolution strategy for GSIBs and their global affiliates. In 2017, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency published the final U.S. QFC Stay regulation rules. Combined the US QFC Stay regulations are a set of new requirements requiring GSIBs to amend their QFCs with all counterparties to agree to a short time window before claiming exercising default rights, to permit the transfer of QFC exposures of a failing bank, and to eliminate cross-default provisions from active QFC agreements. The goal of these changes is three-fold: i) allow a failing GSIB to transfer exposures governed by QFCs to the designated receiver (i.e. FDIC); ii) provide the FDIC with a minimum of 24 hours to assess the QFC exposures of the failed GSIB and decide what actions to take; and iii) prevent cross-defaults to other legal entities of a failing GSIB.  In combination, these changes are designed to prevent a repetition of the problems encountered during the bankruptcy filing by Lehman Brothers Holdings, Inc (LBHI) in 2008.

ENGAGEMENT OBJECTIVES

Regulatory Advisory: Prescribed viable strategic and technological solutions to complex requirements to ensure the bank stays ahead of the regulation and remains competitive while undergoing a large-scale regulatory transformation.

I.  Analyzed provisional and contractual terms for protocol adherence and bilateral amendments to Qualified Financial Contracts.

II. Liaised with Legal and Business to advise impacted counterparties on remediation process through three regulatory phases.

III. Developed requirements to design an end-to-end consolidation report which provides stakeholders visibility into their account setup, investment advisor, beneficial owner, and global legal parent.

Financial, Risk, and Controls: Designed and oversaw the execution of a Post Trade Reporting process used to monitor the bank’s global trading activity across all in-scope counterparties.

I. Created a monitoring and control process used to identify, track, and remediate non-compliant trades. Partnered with Sales & Trading, Business, and Legal to define in-scope transactions and products, determine trade exceptions, and develop a remediation plan for violations.

II. Established escalation procedures and communication plans for regulatory risks.

III. Developed KPIs and reporting metrics for management communications. Addressed and escalated risks and issues while attaining necessary sign-offs required for completion of documentation and processes.

BUSINESS VALUE

Monticello Consulting Group provides services across the financial services industry to tackle the latest regulatory changes. By working with clients to understand the complex nature of business requirements and assess the impact it has on both existing and new business models, Monticello enables clients to implement the necessary risk and control framework to ensure compliance. Our team partnered with Business, Legal, Technology, and Sales & Trading to develop business requirements and oversee the end-to-end execution of an enterprise-wide risk and control process for the QFC program. By leveraging our regulatory knowledge, project management expertise, and proven governance standards, Monticello successfully ensured global trading activity was undisrupted while undergoing a business-critical regulatory initiative.

SKILLS & KNOWLEDGE (Level of Difficulty)

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Leading Transformation: IBOR Portfolio Transition and Go-to-Market Readiness

Engagement Summary

The Interbank Offered Rates (IBOR) underpin the vast majority of derivative and cash loan product contracts in the financial markets. As a result, the IBOR transition is likely to be one of the biggest transformation programs many global financial institutions undertake. Given the current focus on the COVID-19 pandemic, this transformation is even more challenging prompting the need for strong program leadership. The wholesale banking technology organization of a top 10 global commercial bank engaged Monticello Consulting Group in late 2019 to spearhead and manage the IBOR Transition Program. The massive transformation to be prepared for IBOR cessation can be broken into two distinct areas: 1) Portfolio Transition Readiness and 2) Go-to-Market Readiness. Portfolio Readiness is achieved by understanding all existing IBOR exposures and having vetted processes in place to shepherd every exposed facility to an approved risk-free rate (RFR), such as the Secured Overnight Financing Rate (SOFR) in the U.S. and the Sterling Overnight Index Average (SONIA) in the U.K.. Go-to-Market Readiness is achieved by the enhancement and testing of all pricing, underwriting, fulfillment, accounting, and data repositories that will need to onboard and service new facilities referencing the RFRs. Accounting system enhancements have been deemed the most critical and complex to support new RFRs and billing conventions.

Monticello was brought in to advise on key areas related to both Portfolio Transition and Go-to-Market Readiness:

Wholesale Credit Portfolio Transition Tools and Process:

In preparation for the IBOR cessation, Monticello was asked to review the current business-as-usual processes (credit, operations, technology, and fulfillment) that were in place and determine the scalability and stability. In addition, Monticello also evaluated the ability of existing processes to handle large volumes of transactions in an abbreviated timeframe. During the review, gaps were identified and Monticello designed an end-to-end process to guide the client engagement and facility transition activity of the internal partners. In support of the end-to-end process redesign, Monticello identified the need for, and managed the development of, new internal tools that would enable the bank to systemically intervene in the repricing process thereby reducing the time required for migration. This enhanced process ensured that the bank: (1) engaged and communicated with all clients (2) maintained all legal requirements of each agreement and (3) the ability to demonstrate each step taken to management, clients, and regulators.

Wholesale Credit Loan and Lease Accounting Enhancements:

Monticello was tasked with managing and delivering the end-to-end implementation of enhancements to all loan and lease accounting system of records. This included the ability to support the new risk-free rates (SOFR, SONIA, ESTR, SARON, TONAR), a ‘spread adjustment’ rate to those existing IBOR-referenced loans, and implementation of the new fallback language. In addition, Monticello partnered with the client’s subject-matter experts to construct an integrated project plan to transition all existing loans (legacy loans) and prepare new loans (“Go-to-Market Readiness”) before the industry-wide deadline of December 31st, 2021. Monticello advised the clients on new industry-wide requirements as consultative papers, rules, and regulations continue to emerge. As the IBOR transition impacts many different people, processes, and technology, Monticello reinforced strong governance and control practices. This included a detailed RACI (responsible, accountable, consulted, informed) matrix and an Integrated Communication Plan across the various teams. Additionally, Monticello ensured all sign offs were requested and received before completing all milestones ensuring completeness throughout each stage of the program.

Case Study Detail

PROJECT BACKGROUND

Global regulatory standards published in 2018 require all financial institutions to discontinue issuing IBOR-based loans and derivative contracts by December 31st, 2021. To stay competitive in the wholesale lending market and maintain market share, our client is making significant technology and operational investments to be prepared to support RFRs across multiple currencies. Banks and sell-side firms will lead issuance of RFR-linked products, providing critical liquidity to the market which will enable an industry-wide migration from IBOR-linked derivatives and cash loan products. This program was initiated as a result of a combination of pending regulatory requirements and business efforts to remain competitive.

ENGAGEMENT OBJECTIVES

LIBOR Transition Monitoring Tool Design:

Redesigned the end-to-end rate change, credit documentation, and approval processes to ensure stability and scalability. Additionally, repricing tasks were automated to allow for the most efficient transition possible. Developed new technology tools for use by stakeholders to transition facilities and provide the necessary data for monitoring. Designed interface and user actions within the technology tools to minimize the time frame needed during the transition. Designed and implemented new credit processes to allow for large scale approvals and documentations. Conducted multiple user group reviews to enhance the tool and identify existing process gaps. Created solutions to address the internal gaps utilizing existing tools as well as identifying new processes to close gaps. Tested end-to-end processes and solutions to ensure completeness and accuracy.

Loan and Lease Accounting System Program Management:

Developed an integrated project plan, covering all loan and lease accounting system of records, to successfully track and report the progress to ensure both Portfolio and Go-to-Market Readiness. Developed both industry and enterprise-wide IBOR requirements to ensure alignment with up-to-date regulatory announcements. Constructed an integrated communication plan, which includes a roles and responsibilities and RACI matrix. Coordinated and managed multiple different releases, engaging application owners and downstream testing partners to ensure operational readiness. Collated market data sources to advise client on industry recommended sourcing methodologies to support RFRs. Obtained stakeholder sign offs to allow software releases and new operational processes enablement.

BUSINESS VALUE

Monticello Consulting Group, through a continuous partnership with wholesale banking technology, operations, product management, and enterprise-wide credit teams, positioned our client to offer new RFRs in wholesale lending agreements and transition existing agreements to new RFRs. Our rigorous program management and testing governance methodologies, end-to-end process understanding, aptitude for risk-sharing, and timely execution supported the tangible business outcomes for our client to ensure readiness for this monumental shift in interest rate benchmark reform.

SKILLS & KNOWLEDGE (Level of Difficulty)

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Managing the Implementation of SEC Security-Based Swaps Rules

Engagement Summary

The Global Banking Organization of a top 10 global investment bank engaged Monticello Consulting Group in late 2019 to lead a change management program and help implement the Security Exchange Commissions (SEC) regulatory requirements for Security-Based Swaps (SBS). The rule establishes recordkeeping, capital and reporting requirements for security-based swap dealers and improve the recordkeeping and reporting requirements for broker-dealers. For Monticello’s client, the rule is expected to impact between 2,000 – 3,000 client relationships, requiring infrastructure updates and the establishment of new business processes. Monticello consultants, with their deep regulatory and change management expertise, were brought in to lead the operations and technology transition to meet the SEC SBS rule and related reporting requirements by the compliance deadline of October 6, 2021.

The Monticello team designed a program governance structure to support multiple workstreams comprised of legal and compliance leads, agile scrum delivery teams, developers and testing teams, as well as operational and business process owners. In addition, Monticello supports senior leadership teams and program sponsors by providing ongoing management communications along with key risks and issues and overall program updates for steering committee decision-makers. The structure below summarizes the program governance implemented by Monticello:

Case Study Detail

PROJECT BACKGROUND

Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act addresses the comprehensive framework for the U.S. financial regulation of derivative products. Under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC has regulatory authority over security-based swaps (SBS) and issued the finalized rule (Rule 135d) on January 5th 2018, with a Federal Register effective date of January 16, 2018. The SEC SBS rule addresses requirements around: Security-Based Swap Dealer (SBSD) registration, business conduct, risk mitigation, recordkeeping, transaction reporting, margin, segregation, and capital. Product scope is single-name and narrow index Credit Default Swaps (CDS), single-name and narrow swaps based on securities or loans (e.g., equity swaps, Total Return Swaps on loans). Given that the breadth and complexity of the SEC SBSD rule and corporate transformation that would need to be undertaken, an overarching program governance was initiated to oversee underlying work streams.

ENGAGEMENT OBJECTIVES

Program Management (PM) & Change Management (CM):

Designed and stood up the SEC SBS program governance structure under Corporate Transformation and Change for the Global Banking Organization. Monticello contributed towards the design of the Program Management Office (PMO) to ensure all transformation and changes to the client’s systems and processes were delivered as required by the business, operations, and regulatory mandates. The PMO structure included the following:

• Define program workstreams, reporting routines, and ongoing program governance based on regulatory requirements and alignment with business needs.

• Identify and manage program assumptions, key issues/risks and internal/external critical dependencies.

• Ensure adherence to overall enterprise change management standards.

• Ensure stakeholder engagement and buy-in.

Communications & Training:

Developed a strategic communications plan to provide critical updates to stakeholders in a timely fashion. The communication plan established audience, communication objective, and channel of delivery. Critical information was summarized in a dashboard that communicated regulatory updates, program status and key risks, issues and dependencies. In addition, the PMO defined key program metrics to facilitate the decision making process of senior program executives.

BUSINESS VALUE

Monticello’s team, through a continuous partnership with Global Banking technology and operations teams, positioned our client for success in developing the operational and technological capabilities to efficiently meet the SEC regulatory requirements. Monticello brought structure to this complex initiative by leveraging Monticello’s program management frameworks. Our team conveyed strong governance standards, regulatory knowledge and end-to-end process understanding to ensure effective change management while meeting the client’s strategic objectives. This partnership has enabled our clients to retain market share of security-based swaps.

SKILLS & KNOWLEDGE (Level of Difficulty)

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The Future of Project Management: Automated Reporting

Engagement Summary

A common problem many program and project managers (PMs) face today is the constant need to update and maintain status reports for executive leadership.  Although these reports are critical, they should not consume so much of a PM’s time that it negatively impacts the timeline of the underlying program itself.  By streamlining and automating the reporting process, PMs will then be able to focus on delivery while still focusing on reporting quality and accuracy. Additionally, senior executives would have access to a centralized location where status reports are available on demand.

Monticello Consulting Group partnered with a Fortune 500 bank to lead the implementation of an in-house project management system. This complex system spanned across multiple teams with the intent of centralizing and standardizing program and project management work in a single location. The executive level status reports could then be automatically generated in real time. The adoption of this application greatly reduced the amount of time a PM would typically spend making manual updates to various reports on an on-going basis.

The Monticello team was responsible for constructing the overall implementation project plan, delivering the necessary training material, conducting live training sessions, and governing user adoption. Additionally, Monticello supported senior leadership teams and program sponsors by providing continuous project updates including any key risks or issues discussed in weekly steering committees.

Case Study Detail

Senior executives found it increasingly difficult to assess program health on a real-time consistent basis. They found themselves in a multitude of meetings with a lot of wasted time spent reviewing status reports. These status reports were in different formats and produced manually by program managers. To lessen the burden on PMs and streamline the process for senior executives, the concept of a centralized tool with automated reporting capabilities was proposed. With this concept, PMs would no longer track their progress offline, but rather, all of their reporting would be managed on a centralized online tool. The use of this tool was easily accessible by senior executives and had the ability to produce real time status reports at the click of a button. This would significantly cut back the amount of time spent producing reports as well as provide senior executives with consistent real-time reporting.

MOBILIZE TEAMS FOR SUCCESSFUL GO-LIVE

Program Management (PM):

Created and managed the overall implementation plan, scope, deliverables, and timeline. Coordinated with key stakeholders and users across business and technology to conduct live user training sessions. Addressed and escalated any relevant risks or issues while attaining necessary sign offs required for completion.

Change Management (CM):

Led the user adoption effort by conducting multiple live training sessions across the organization.  Actively collected and documented user feedback by utilizing online surveys in order to better communicate future changes for all relevant teams

Communications:

Developed a strategic communications plan to provide critical information to stakeholders.  Determined and implemented how, when, and how often communications would be received.

Training:

Designed the training curriculum as well as materials required for all users. Conducted live training sessions supplemented with on-demand recorded sessions to ensure users developed the knowledge and skills needed to use the tool.

BUSINESS VALUE

Monticello Consulting Group is a strategic partner in digital transformation and change management. Our team of highly qualified consultants has extensive experience introducing change to organizations through the use of technology. By using our proven approach to project and change management, we successfully delivered a customized solution resulting in reduced manual efforts, greater efficiencies, and cost reduction across functional areas of the client.

SKILLS & KNOWLEDGE (Level of Difficulty)

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Effective Program Management for Structured Notes Markets

Engagement Summary

In 2019, the structured notes technology organization of a leading investment bank engaged Monticello Consulting Group (MCG) to advise on their existing program management structure, define the tangible target program outcomes, create a tighter link between technology and business, and provide ongoing governance for managing projects. The client’s ultimate goal was to leverage technology to enable the business to expand its trade capture and risk management capabilities.

The MCG team analyzed the program’s current processes and defined a program governance structure to enhance how the technology organization engages with the business to provide more viable solutions for trading efficiencies. In addition, MCG supported senior leadership teams and program sponsors by providing ongoing management communications including managing the technology application roadmap and product and release management reporting. The major challenge for the client was the need for stronger processes to enable large scale business growth while maintaining predictability and transparency between the business and technology teams. Year to date, the structured notes team has achieved many of their desired business and technology goals and have gained significant market share since 2018.

Project Background

The structured notes issuance and risk management organization has begun to expand its business beyond the wholesale industry and into the retail and secondary markets. As competition to sell structured notes has grown significantly throughout the banking industry, our client looked to improve its operations to better position itself for continued growth. Our client made significant technological and operational advances to better support the expansion of more complex business needs.  Improved leadership communications and coordination between the front office business and technology organizations were paramount. Additionally, the critical balance between technology and business requires effective program/project management to eradicate redundancy and scope creep impacting delivery. This strategic engagement with Monticello was initiated as a result of the business’ desires to remain competitive in the structured notes market as they looked for a trusted advisor to support their business-critical change initiative.

Engagement Activities

Program Management:

Analyzed the program’s current processes and how the technology organization engages with the business. MCG advised on the design of an independent PMO to ensure all changes to the client’s systems and processes were delivered as required by the business. Designed standardized templates and test cases for the development team to use and share with the business who would perform UAT testing. Leveraged industry-leading program management methodologies to create and quantify value for the technology team as well as the front office.

Business Value

Monticello’s Change Management team, through a continuous partnership with global markets technology and operations teams, helped position our client for success in developing the capability to expand structured notes issuance in new markets. Our rigorous program management governance methodology, end-to-end process understanding, and timely execution supported business transparency into technology work which allowed the business more opportunities to leverage technological capabilities. The new governance structure also allowed senior leadership to better understand and implement strategy, focus on tangible business outcomes, and engage in more business opportunities in the wholesale and retail trading of structured notes.

Enablement of Agile SAFe for a Global Bank: Intake and Capability Model Definition and Implementation

Engagement Summary

The wholesale banking technology organization of a top 10 global commercial bank engaged Monticello Consulting Group (MCG) in early 2019 to analyze and improve the efficiency of Agile processes across the Treasury Data organization according to Scaled Agile Framework (SAFe) best practices. The goal was to eliminate any redundant efforts, create more controlled project intake and reporting functions, and identify opportunities to improve the existing SAFe processes. MCG spent time observing, interviewing, and understanding the Treasury Data team’s goals and challenges.  During the current state review, it was noted that most aspects of the SAFe framework were implemented and functioning adequately. However, management would gain the most benefits from 1) properly aligning their data model to known business capabilities, 2) implementing a more comprehensive project intake and prioritization process, and 3) creating an accurate metrics reporting framework to better highlight projects at risk, over/under utilized teams, and future program increment planning. 

Case Study Detail

Capability Model

MCG met with Treasury Data management and key data domain stakeholders to understand the primary consumers of treasury data and the overall data strategy of the organization. Based on those discussions, the MCG team mapped data and business domains to business capabilities supported by the Treasury Data team. The resulting capability model promotes a shared understanding of data and stakeholders and is used as a basis for how to structure teams, prioritizing data provisioning requests, and scoping work. It also aligns with the strategic goals of the organization when it comes to the availability and provisioning of data globally.

Intake and Prioritization

The team observed that due to the high volume of treasury data provisioning requests coming from across the Wholesale Banking enterprise there were opportunities for improvement regarding the management of intake, prioritization, and viability assessments of work before it even reached the product owners, development teams, and product backlog. To improve the efficiency of data request management, MCG created a project intake and prioritization model for data requests which included a detailed end-to-end process flow and supporting team structure with roles and responsibilities. The intake and prioritization model enabled the Treasury Data team to engage the right data domain experts, map it to a business capability, and prioritize it against the project backlog.

Reporting Framework

As per Agile SAFe principles, the client had organized development efforts into time-boxed sprints within defined program increments. The sprint structure was working adequately, however, there was no mechanism to report accurate project status to upper management to properly forecast for future budget cycles and monitor against current budget limitations. To address this, MCG implemented Sprint Burndown and Velocity metrics along with Program Increment level reporting to keep key stakeholders up to date on overall delivery timelines and provide an executive level view into the accomplishments of the Treasury Data team and their integral role with provisioning data across the enterprise.  

Business Value

Monticello’s team, through a continuous partnership with Treasury Data and operations teams, positioned our client for success by identifying opportunities to create efficiencies by applying SAFe principles and eliminate weak processes. Our program management, governance and software delivery experience, end-to-end process understanding, and timely execution supported the client’s goal of continuously improving its current Agile SAFe software delivery capabilities.

And Then There Was One: Consolidating Trade Booking and Lifecycle Management Systems for a Global Bank

Engagement Summary

Banks with high volumes of capital markets transactions maintain a wide range of product-specific trade booking and life-cycle management systems. For example, equity trading divisions will typically have separate systems for their cash equities, equity derivatives and stock lending/borrowing activities. Similarly, fixed income, FX and commodity trading divisions will have their own asset class and instrument-specific systems. This results in an unwieldy and highly complex IT infrastructure that requires vast quantities of human and financial resources to maintain. It also creates significant dependency and reliance on vendors for any major system changes, upgrades and ongoing product support. In 2018, the capital markets technology division of a global US banking institution retained Monticello Consulting Group (MCG) to assist with a large-scale transformation program to address these challenges.

Monticello’s client embarked on a multi-year initiative to build a centralized platform to accommodate a wide range of capital markets asset classes and instruments. The ultimate goal was to migrate all of the bank’s financial instruments onto this single system, yielding significant cost savings through the elimination of vendor fees and a reduction in overhead costs. In addition, a single centralized data model will reduce the efforts to meet regulatory reporting requirements and fulfill the reporting needs of internal stakeholders. The centralized platform has the added benefit of adhering to the ISDA Common Domain Model for derivatives products, which facilitates automation of back-office and reconciliation processes by using a standard representation of derivatives trade life-cycle events.

The implementation of a universal transaction platform is an ambitious undertaking that requires close collaboration between multiple technology groups, front office users, operational groups, risk management and finance partners. MCG consultants support our client’s executive leadership team with key program management and application integration expertise.

Project Background

Maintaining a large number of front-end trade booking and life-cycle management systems is both costly and inefficient. Consolidating disparate systems into a single platform will enable our client to stay competitive and to reduce inflated capital markets transaction processing costs. This program was initiated as a result of a cost analysis exercise which identified that our client’s per-transaction costs were significantly above those of peer institutions. In response, the bank developed a compelling business case which demonstrated the direct savings and operational efficiencies that could be gained through system integration and consolidation. Given the scale and complexity of the program, the client requested expertise from MCG to support several key efforts.

Engagement Objectives

Program Management:

MCG revised and streamlined the program governance structure for the client’s technology organization. We implemented an automated project management and reporting framework based on the bank’s existing Program Management Office (PMO) infrastructure. In addition, MCG developed the materials and framework used to communicate to the governance groups and the technology initiative oversight teams.

Testing Governance:

MCG partnered with the client to manage the development and implementation of the testing and reconciliation framework required to validate pre-production releases vs. conditions in legacy environments. The team created a streamlined and coordinated release playbook to manage activities across a large group of stakeholders within the various lines of business. MCG consultants obtained stakeholder sign-offs, oversaw software releases and maintained a documentation archive to capture all relevant supporting artifacts.

Client Value

MCG is a specialized service provider with knowledge and expertise delivering large-scale transformation programs. Our deep understanding of the competitive forces reshaping business models in capital markets, lending, payments, and digital banking are proven enablers that support our clients to remain competitive and gain market share in new and existing businesses. By leveraging our core practice areas covering Agile transformation, program management, and integration governance for complex change, MCG positioned its client for success by delivering the initial build-out of its proprietary booking and life-cycle technology solution. Our innovative program management approach allowed client stakeholders to drastically reduce the time spent updating multiple project plans and coordinating status updates. Instead, the client focused its time on meeting the milestones required to achieve the program’s rigorous schedule.

Leading Change for a Global Bank: Consolidated Audit Trail (CAT)

Engagement Summary

Monticello Consulting Group (MCG) partnered with the Non-Financial Regulatory Reporting (NFRR) team at a tier 1 global bank to help lead the transition of Order Audit Trail System (OATS) reporting to a new technology platform while also leading the planning and implementation of upcoming CAT reporting requirements. MCG’s rigorous program management and testing governance methodologies, prior experience in the OATS space, end-to-end process understanding, and timely execution helped achieve the business objectives for our client and prepared them for CAT reporting obligations.    

Specifically, MCG was brought on-board to manage the following:

Successful implementation was critical for the bank to fulfill a regulatory commitment and launch the new reporting engine which will also support CAT. MCG continues to support the operations team for the upcoming CAT requirements through planning, stakeholder management and program leadership. The MCG team recently developed an operations stability plan establishing end-to-end controls from data sourcing and aggregation, transmission and post submission to better manage increased CAT reporting requirements and stabilize BAU. MCG has partnered with the client from the start by planning and structuring the program, setting up testing best practices and ensuring the build per CAT regulatory requirements.

CAT Reporting Timeline (as of June 2019):

Project Background

The SEC rule 613, CAT, aims to track lifecycle activity throughout the U.S. markets in National Market System securities and identify the broker-dealers handling them, thus “creating a comprehensive consolidated audit trail.” CAT’s primary objective is to enhance the ability of the SEC and Self-Regulatory Organizations (SROs) to oversee trading in the US equity and listed options markets. CAT greatly expands on the requirements of the Order Audit Trail System (OATS) regulation, which was adopted in 1998. Firms who have processes and controls in place for OATS will need to conduct gap analysis and extensive planning in order to ensure a smooth transition to CAT, which requires significantly increased data reporting requirements.

Engagement Objectives

Program Management:

The MCG team planned and managed execution of OATS UAT involving various Order Management Systems (OMS) and a reporting system while partnering with IT for defect resolution and production roll-out. Authored CAT BRD ensuring each OMS complies with the latest data dictionary requirements and planned for CAT testing. Established controls and escalation points for the various systems and support teams listing out the processes as part of the operations stability plan.

Testing Governance:

Created a detailed UAT plan highlighting scope, approach, and execution strategy of OATS and CAT UAT. Created UAT test scripts ensuring full scenario coverage for each order management system. Validate testing results, identify defects, perform root cause analysis and coordinate with IT to manage defect resolution. Managed all UAT cycles, engaging the OMS responsible for OATS generation and obtaining signoffs for production release.

Business Value

MCG assists clients across the financial services industry in implementing the necessary infrastructure to ensure compliance and reduce regulatory risks. The MCG team through its planning and approach formed a strong partnership with the OATS operations, technology and change management teams, and gained the trust of the stakeholders early on to ensure that the new platform is fully verified and tested before accepting it as the BAU reporting engine. MCG’s comprehensive testing techniques and governance, strong project management practices and expertise in this area helped the client achieve regulatory commitments, compliance and business objectives.

Leading Change for a Global Bank: IBOR Replacement for Wholesale Banking

Engagement Summary

The wholesale banking technology organization of a top 10 global commercial bank engaged Monticello Consulting Group (MCG) in late 2018 to help lead and manage the program to transition off Interbank Offered Rates (IBOR).  The business outcome being sought was a transition of the bank’s wholesale loans business from IBORs to new alternate reference rates, such as the Secured Overnight Financing Rate (SOFR) in the US and Canada and the Sterling Overnight Index Average (SONIA) in the UK.  MCG was brought in to advise on the program structure, define the target outcomes, and provide ongoing governance for the multi-year IBOR replacement program to prepare the bank to offer alternate reference rates to its wholesale lending customers in the US and European markets by the end of 2019, with other geographies to follow in 2020.

The MCG team designed a program governance structure to support multiple workstreams comprised of wholesale credit product owners, agile scrum delivery teams, developers and testing teams, as well as operational and business process owners. In addition, MCG supported senior leadership teams and program sponsors by providing ongoing management communications including the technology application roadmap, product and release management reporting, along with key risks and issues and overall program updates for steering committee decision-makers. The structure below summarizes the program governance implemented by MCG:

Project Background

Global regulatory standards published in 2018 require all financial institutions to discontinue issuing IBOR-based loans and derivative contracts by 2021 and replace these products with alternative reference rates based on regional requirements. To stay competitive in the wholesale lending market and maintain market share, our client is making significant technology and operational investments to be prepared to support SOFR and SONIA rates in lending contracts as early as Q2 of 2019. This program was initiated as a result of a combination of pending regulatory requirements and business efforts to remain competitive.

Engagement Objectives

Program Management:

Designed and stood up the IBOR replacement program governance structure for the wholesale banking technology organization. MCG advised on the design of an independent PMO to ensure all changes to the client’s systems and processes were delivered as required by the business, operations, and regulatory mandates for the IBOR replacement program. 

Testing Governance:

Developed testing plans with technology and business teams to track the effectiveness of technology enhancements being introduced as a result of this program. Conducted multiple end-to-end testing cycles engaging application owners and project working groups within the wholesale credit line of business. Obtained stakeholders signoffs to allow software releases and new operational processes enablement.

Business Value

Monticello’s team, through a continuous partnership with wholesale banking technology and operations teams, positioned our client for success in developing the capability to offer alternative reference rates in wholesale lending contracts. Our rigorous program management and testing governance methodologies, end-to-end process understanding, aptitude for risk-sharing, and timely execution supported the tangible business outcomes for our client to be ready for this monumental shift in interest rate benchmark reform for global debt instruments.

Uncleared Margin Rules: Managing a Highly Visible Global Regulatory Mandate for Readiness and Go-Live

Engagement Summary

Since the first over-the-counter (OTC) derivatives margin rules rolled out in 2016, large broker-dealers and global banks have faced increasing compliance costs, all the while competing with central counterparty clearing houses. To stay relevant in the OTC business, our clients have invested significantly in technology solutions aimed at streamlining operations and client onboarding processes. With deep experience managing regulatory compliance programs, Monticello has been selected as the choice partner to maximize return on investment for upgrading collateral platforms to keep our clients in compliance with Unclear Margin Rules (UMR).

In 2020, buy-side firms such as asset managers, institutional investors, private equity firms, and hedge funds will become subject to UMR Initial Margin (IM) regulatory requirements. The number of counterparties coming into scope for Phase 5 of UMR will increase from the current count of a few dozen large banks and broker-dealers to thousands of trading counterparties by September 2020. To support this significant increase in counterparty inclusion in the regulation, global banks are upgrading their technology platforms and processes to support a monumental transition for their buy-side clients. Third-party solutions, aimed at streamlining the legal document negotiation process, are attempting to use UMR as an opportunity to digitize a historically manual negotiation process. Monticello has helped our clients identify viable third-party solutions, assess the technical and operational challenges associated with each solution, and facilitate a smooth integration with the selected vendor solution.

The table below shows threshold amounts that are gradually lowered, falling to $8 billion in notional amount in Phase 5 by September 2020. As the IM threshold is lowered, the number of counterparties that will be subject to UMR dramatically increases.

*Amounts reflect an aggregate average notional amount (AANA) for March, April and May of each phase-in year

Project Background

Since 2015, Monticello has partnered with large banks, broker-dealers, and asset managers subject to UMR for OTC derivatives.  Monticello continues to support clients with program management and testing governance services while also leading operational improvements and enhancements to trading processes. Our expertise in testing governance includes client onboarding, legal documentation negotiation leveraging new cloud-based platforms, collateral processing for prime brokerage clients, portal-based integration with buy-side clients thus offering margin pricing tools, and access to a large network of third-party custodians.

Engagement Objectives

Program Management:

Raise program awareness across OTC derivatives sales and trading desks.  Manage the execution of go-live activities detailed in a “runbook” that engages legal, operations, technology, and change teams.  A runbook contains the go-live tasks and coordinates their execution across the many departments involved in the event over a defined time period.  Typically, the time period begins several days or weeks prior to the go-live event and stretches past go-live to ensure the production environment is stable and clients are not negatively impacted by the large changes being introduced to the business processes and technology platforms.

Testing Governance:

Conduct multiple end-to-end trade and margin processing testing cycles, engage application owners within the UMR ecosystem.  Obtain stakeholders’ signoffs to allow software releases to production and enable new operational processes.

Perform reference and trade data quality checks and track the collateral processing of initial margin calls within service level agreements.  Operate a “control room” to gather critical issues and report service status to program stakeholders during the go-live period.

Service Introduction:

Business Value

Through a continuous partnership with our clients’ technology and operations teams, Monticello has been able to support the tangible business outcomes sought by our clients to achieve compliance within the new UMR regulations. Monticello’s rigorous program management and testing governance methodologies, understanding of end-to-end business processes, willingness to shoulder delivery risk, and timely execution has supported our clients’ strategic objectives.  This partnership has enabled our clients to retain market share in the competitive landscape of OTC uncleared swaps trading.

Tier 1 Global Financial Institution: Strategic Business Restructuring

Engagement Summary

Since 2015, Monticello Consulting Group (MCG) has partnered with a Tier 1 global financial institution to separate the existing broker-dealer business that provided coverage for its Retail clients and Institutional business. MCG’s regulatory and project management expertise helped distinguish the team from the competition, and that has given the customer the confidence to engage MCG across the life of the program to lead pivotal roles across major workstreams.

The existence of institutional and retail broker-dealer business activities within the same legal entity gave rise to risk that, in the event of a liquidity shortage in the institutional business, the retail business would be adversely impacted.  Further, in the event of a regulatory proceeding, retail client assets could be frozen for a significant period of time. As a result, this could cause client hardship and a systemic risk of a run on the retail banking business as a whole.

The MCG team served as a primary point of liaison across workstreams and the Executive and Technical PMOs. MCG project managers and business analysts were able to draw on their experience and expertise and work with stakeholders from all functional areas throughout the project lifecycle leveraging proven MCG methodologies and toolsets while also developing custom solutions required for this program’s success. MCG financial services SMEs provided further guidance to support regulatory and business requirements.  To minimize the risk associated with such a large program, the transition was split into multiple releases beginning in 2017 and running through 2019.

Project Background

The client aimed to separate the business into two legal entities to provide optionality of resolution strategies.  As a result, the institutional business was migrated into a newly formed broker-dealer while the retail business remained in the existing broker-dealer. Project benefits included the reduction of the company’s systemic risk profile, increased resolvability, and optimized technology and operations infrastructure for the target entity.

Engagement Objectives

Project Management:

• Served as primary point of contact with Executive PMO and Technical PMO for covered workstreams

• Managed PMO risk reporting and tracking

• Prepared regularly scheduled formal briefings including structured decks and metrics

• Developed executive briefings

• Liaised and coordinated collaborative activities with other workstreams

• Designed and implemented project management tools for reporting and metrics

• Developed Resource Plans and maintained project life-cycle for business and technology teams

Business Analysis:

• Developed Business Requirement Documents with traceability matrices for covered products

• Created test cases for covered products

Testing Governance:

• Developed test plan definition and execution management for multiple products for migration and future state end-to-end transaction flows and booking models

Service Introduction:

• Built and tested (Dress-Rehearsals) of Go-Live Run Book for covered work stream

• Managed Control Room during event execution of Dress Rehearsals and Go-Live

Business Value

Based on MCG’s long-standing and highly successful relationship, the client entrusted MCG with many key aspects of the program from start to finish. Given MCG’s ability to provide leadership, communications, project management, and proactive support, the partnership continues to flourish through execution and MCG has taken on additional roles and responsibilities to support program expansion. Today, the team continues to deliver exceptional results and the program is on track for a successful go-live in Q2 2019.