Article
Principia: Middle-Market Mavens
February 1997: Derivatives Strategy
Many derivatives vendors focus the lion's share of their attention on the top 20 global banks. Principia has focused its efforts on serving the middle-market derivatives dealers and end-users who are often afraid of becoming "just a number" at larger derivatives software vendors.
At two years old, Principia is beginning to outgrow its reputation as a "new" software company. "We are reaching the state where our new prospects are no longer asking us if we are going to be around for the long haul," says Theresa Adams, one of the firm's principals and the director of sales and marketing. "We already have a track record we can point to."
Unlike many start-up software companies which are populated by wide-eyed twenty-somethings high on technological expertise and low on market experience, Principia's founders claim to have more than a century of experience in the derivatives software industry. The systems had its origins in Republic National Bank's front-, middle- and back-office software, which its founders had developed subsequent to building a similar system at Mercadian Capital Markets.
"Most of our clients don't want to spend a great deal of time and money on developing a custom system," says Adams. "We offer integrated front-, middle- and back-office functionality that can be installed and running live within days." For example, last year Principia installed nine client sites in a single week. "The average Principia installation takes about four hours," says Adams.
Principia claims to have sophisticated pricing and risk analysis techniques. "Our system allows mid-market clients to track, analyze and price very complex transactions. This ability is particularly helpful to smaller institutions which might otherwise have to rely on dealer price quotes." To increase the pricing options available to clients, Principia also offers a data service that includes volatility, option and swap spreads across a variety of global markets. "Let's say you are a regional bank and you have purchased a bond that is linked to the Deutsche mark. If your firm does not routinely follow the German markets, Principia's download service can help fill that gap." Principia also maintains a dedicated staff of quants who create the daily price data and are available to clients to answer valuation questions.
Attracting a top-notch staff has also remained a top priority at Principia. One of its more recent hires is back-office product manager John Fry, who formerly held the same position at Infinity, and other new managers are of the same high caliber. As of December 1996, the firm had brought aboard six new clients, and Adams was optimistic about signing a seventh by the end of 1996.
Company: Principia
Founded: January, 1995
Public/Private: Privately held
Overview: Principia Analytic Systems (PAS) is a comprehensive
turnkey solution for derivative and risk management system needs
with fully integrated front- to back-office capability employing
common methodologies for valuation, hedging, credit risk, accounting
and operations. Principia combines dealer-level sophistication with
simplicity of installation and operation, a combination that's particularly
appealing to end users and regional dealers.
Special features: Historical and closing data feeds available
for rates, spreads, volatilities in multiple markets; supports path-de
pendent options; flexible user-defined hedging instruments
Products include: Principia Analytic Systems (supports global
interest rate, foreign exchange and equity linked instruments and
associated options)
Hardware requirements: Sun Sparc work stations (Solaris 2.x
UNIX), A Windows NT version of Principia is scheduled for re lease
later this year.
Clients include: Eight U.S. Federal Home Loan Banks, ITT Hartford,
The Boatmen's National Bank of St. Louis, National City Bank, PNC
Bank, BlackRock Financial Management, Peregrine Investment Holdings
Ltd.