fixed income account management for bond liaisons or the ...automated monitoring with e-alerts...

DeskView™ - System Overview 1

Fixed Income Account Management for Bond Liaisons or the Trading DeskInsight comes from understanding

Insight is Everything

System Overview


BondWave LLC 120 E. Liberty Drive

Suite 400 Wheaton, Illinios 60187

630.517.7000 www.BondWave.com

2014-09-29 Copyright © 2014 BondWave LLC - All Rights Reserved BondWave® is a registered trademark of BondWave LLC


Table of Contents

Overview ........................................................................................................................ 4

Trade Opportunity Mining and Communication ......................................................... 6

Automated Monitoring with E-Alerts ........................................................................... 8

Strategy-Based Bond Investing .................................................................................... 10

Business Intelligence and Reporting............................................................................ 12

Technology .................................................................................................................... 14

Appendix I - Bond Offerings and Selection .................................................................. 16

Appendix II - Bond Types and Strategies ..................................................................... 17

Appendix III - Bond Type Attributes ............................................................................. 20

Table of Contents


Overview

DeskView is a powerful software application that enables trading desk personnel, bond liaisons or other investment professionals to extend a superior fixed income investing experience to reps, advisors and investors.

DeskView facilitates a proactive and coordinated approach to fixed income trading and portfolio management. It works in conjunction with your existing trading systems, trading partners and service providers to improve workflow efficiency and overall communication. In addition, DeskView serves as a conduit of actionable fixed income business intelligence that gives all parties a better understanding of accounts and holdings.

In this solution, BondWave takes an impartial position on bond offering sources and trade execution. Refer to “Appendix I - Bond Offerings and Selection” on page 16 for additional information.

Primary Features of DeskView include:

Trade Opportunity Mining and Communication

Trade ideas can be enacted system-wide in minutes, if not seconds. Powerful search capabilities quickly identify all holdings or accounts that are candidates for a buy, sell or swap opportunity. From the search results, individualized electronic proposals can be immediately generated, reviewed and sent to all appropriate reps/advisors along with system reports and supporting commentaries.

Automated Monitoring with E-Alerts

Accounts and holdings are inspected in a regularly-scheduled, automated process. Electronic alerts can be sent to either the fixed income specialist or the rep/advisor if action items are identified. The monitoring process helps the specialist and advisor be more proactive with accounts that need attention or would benefit from a marketplace opportunity.

Strategy-Based Bond Investing

DeskView enables your firm to provide a strategy-based bond investing service as a compelling alternative to bond funds or traditional SMAs. Your firm’s own fixed income investment strategies may be defined as ‘strategies’ within the platform. The system includes tools to expedite portfolio construction, monitoring, rebalancing and reporting that enable your fixed income specialists to extend a highly-personalized managed account experience to reps, advisors and investors.


Business Intelligence and Reporting

Interactive queries, dashboards and drill-down views help investment professionals analyze accounts, holdings, offerings and the firm’s overall fixed income business with a more comprehensive, in-depth perspective. In addition, DeskView offers a wide selection of presentation-quality fixed income reports suitable for management, rep/advisor or client review.

DeskView is designed to help your firm maximize trade opportunities, grow and retain assets, and differentiate itself with superior fixed income services. It’s a scalable solution that will support your continued asset growth and will enable your firm to manage the fixed income investment process more effectively than ever before.


Trade Opportunity Mining and Communication

DeskView helps fixed income specialists facilitate the trade opportunity process and improve proposal communication to reps or advisors. Trade ideas can be enacted system-wide in minutes - if not seconds - through a highly-integrated, three-stage process:

1. Identify Candidates

Specialists can utilize either ad-hoc or saved searches across all accounts or holdings to quickly identify candidates for a buy, sell or swap opportunity. Virtually any conceivable type of search can be executed. Refer to the following page for a partial list of trade scenarios.

2. Create Proposals

From the search results, unique proposals can be immediately generated for each candidate with account-specific information and detailed trade statistics. Bond offerings for a buy or swap opportunity can originate from any trading partner or offering source.

3. Communicate the Opportunity

An electronic correspondence feature lets specialists select an appropriate email template for the trade. They can also attach system-generated reports for each account – along with commentary or analysis material - to help support the reps’ or advisors’ discussions with their clients. The proposals are then sent to each individual rep or advisor through your firm’s standard e-mail or messaging system.

Additional Communication Features

• Predefined electronic correspondence (email) templates are available for most fixed income trading and portfolio management needs

• Correspondence templates may be private-labeled and customized for your firm; additional templates can be created as needed

• The correspondence feature can also be used to send non-trade communication to targeted audiences

• Correspondence Manager and Proposal Manager functions provide an archive of all messages and proposals sent from the system


Trade (Swap) Opportunity Examples

DeskView enables searches for virtually any conceivable type of trade scenario, including (but not limited to) the following examples:

Tax• Out of State• Tax Loss• AMT• Crossover Opportunities

Redemption• Called / Maturing• Pre-Refunded

Events• Downgrades• Outlook / Watch Changes• Other Material Events• Insurance Changes• News Items

Strategy• Increase Call Protection• Increase Credit Quality• Increase Income• Rebalance to a strategy• Modify Portfolio Duration• Identify / Resolve Non-Compliance• Identify / Resolve Diversification Risks• Improve Monthly Income Distribution• Reinvest Cash Based on a Strategy

New / Prospect Account Proposals

• Import existing holdings from a spreadsheet

• Create multiple proposals for an account to cover different ‘what if’ scenarios

• Email proposals along with supporting DeskView reports and other attachments


Automated Monitoring with E-Alerts

DeskView includes automated account monitoring functions designed to reduce your portfolio monitoring workload and provide timely notification of issues that affect accounts or holdings. The monitoring process will:

• Identify market events (such as called, maturing or downgraded bonds)

• Allow you to maintain portfolio alignment to a selected investment strategy

• Identify changes to the value of an account or holding over time

• Compare accounts or holdings against firm-wide investment policies or compliance guidelines

Electronic alerts with account- and holding-specific information are sent to the trading desk and/or advisor when action items are encountered. When alerts are issued, material event or inspection reports are also generated to provide additional detail on the action item. An interactive ‘lookup’ function in the desktop interface enables specialists to see a list of flagged accounts or holdings and then quickly initiate a buy, sell or swap trade opportunity.

Monitoring functions may be customized for each account and may be run daily or at other specified intervals.

Monitoring Events

DeskView will monitor accounts and holdings for the following events:

Defaults• Non-Payment Related Defaults• Payment Delinquencies• Unscheduled Draws on Credit Enhancements• Unscheduled Draws on Debt Service Reserves

Called / Escrowed to Maturity / Pre-Refunded• Bid for Action Rate or other Securities• Bond Call• Defeasance• Notice to Investors Pursuant to Bond Documents• Tender Offers


Credit Enhancement Status Changes• Appointment of a Successor or Additional Trustee or the change of the Name

/ Trustee• Bankrupt Insolvency Receivership or Similar Proceeding • Capital or other Financing Plan• Change in the Obligated Person• Change of Trustee Tender Agent, Remarketing Agent or other Ongoing Party• Derivative or other Similar Transaction• Litigation Enforcement Action• Merger Consolidation Reorganization in Solvency Bankruptcy• Mergers, Consolidations, Acquisition, the Sale of All or Substantially All of the

Assets• Release, Substitution or Sale of Property Securing Repayment• Substitution of Credit or Liquidity Providers, or their Failure to Perform

Ratings Changes

Tax Status• Adverse Tax Opinions or Events• Communications from the IRS

Financial Operating Disclosure• Annual Financial Information Operating Data under Rule 15c2-12• Audited Financial Statements of CAFR under Rule 15c2-12• Budget• Change in Accounting Standard• Change in Fiscal Year/Timing of Annual Disclosure• Consultant Report• Failure to Provide Event Filing Information• Failure to Provide Annual Financial Information as Required Under Rule 15c2-1• Information Provided to Rating Agency or Credit/Liquidity Provider or Other

Third Party• Interim / Additional Financial Information / Operating Data• Investment / Debt / Financial Policy• Other Financial / Operating Data• Quarterly / Monthly Financial Information

Bondholder Rights

Outlook Changes• Issue Outlook Changes• Issuer Outlook Changes

Watch-List Changes• Issue Watch list Changes• Issuer Watch List Changes

Other• Amendment to Continuing Disclosure Undertaking• Other Event Voluntary Information


Strategy-Based Bond Investing

DeskView enables your firm to provide a strategy-based bond investing service as a compelling alternative to bond funds or traditional separately-managed accounts. Your firm’s own fixed income investment strategies may be defined as ‘strategies’ within the platform. In addition to investment allocation, strategies may also incorporate criteria according to your firm’s investment policies and compliance guidelines.

DeskView includes features to expedite portfolio construction, monitoring, rebalancing and reporting. Our approach would enable your fixed income specialists to efficiently provide a highly-personalized, managed account experience to reps/ advisors and investors. Strategy-based investing gives you the opportunity to highlight the services of your fixed income team as a means to attract and retain assets.

Our process is designed to provide investors with a structured, disciplined approach to bond investing. A high-level, conceptual overview of the strategy-based investment process is described in the steps on the following page.


Investment Process

1. Select an Investment Strategy

A rep or advisor would work with your fixed income team to identify an appropriate investment strategy for their client. A fixed income specialist would then assign the account to the selected strategy within DeskView.

2. Create a Proposal

The fixed income specialist would review the account within DeskView. A highly-interactive, graphical dashboard shows account statistics for both the existing and proposed portfolio.

Any existing bond holdings in the account that ‘do not fit’ the strategy guidelines are flagged in the system and the specialist can mark them to be sold. Bond offerings are automatically filtered for each branch in the strategy. The specialist may simply drag-and-drop a desired offering into the proposal window. The dashboard is immediately updated with each change to allow the specialist to quickly see the effects of a proposed ‘buy’ or ‘sell’. Multiple proposals can be created to show different ‘what if’ scenarios for an account. When ready, the specialist can email the proposal(s) to the rep or advisor for review. System reports can be attached to the proposal to assist the rep’s or advisor’s discussions with their clients.

3. Execute Trades

Upon the rep’s or advisor’s approval of the proposal, the fixed income team would execute the trades according to your firm’s standard procedures.

4. Monitoring and Rebalancing

The account is monitored on an ongoing basis using DeskView’s automated monitoring process.

Read more about BondWave’s innovative approach to fixed income portfolio management in “Appendix II - Bond Types and Strategies” on page 17.


Business Intelligence and Reporting

DeskView is continually updated with a number of web service data feeds. It consolidates the data and provides a conduit of actionable fixed income intelligence to the specialist. Interactive queries, dashboards and drill-down views help investment professionals analyze accounts, holdings, offerings and the firm’s overall fixed income business with a more comprehensive, in-depth perspective.

Interactive Queries and Analysis

• Powerful search capabilities within the system’s Accounts, Holdings and Offerings screens can be utilized for business analysis or to identify transaction opportunities

• Multiple search parameters and inter-dependencies can be utilized to create sophisticated queries

• Commonly-used or complex queries can be saved for easy retrieval

• A number of “Group By” options are available to filter and aggregate search results into the desired context

• Drill-down paths in the Accounts and Holdings screens let you explore different levels of detail. At each level, a context-specific dashboard with summary statistics and graphs is updated to reflect the current data selection.

Presentation-Quality, Graphical Reports

• Over 40 fixed income reports are available for advisor or management review

• Reports may be private-labeled with your firm’s logo and company information

• Reports may be scheduled to run at regular intervals or may be run on-demand

Bond Descriptive Data

• Multiple third-party data feeds supply up-to-date information for over 160 bond attributes

• Bond descriptive data is integrated throughout the application for queries, reports and comparing ‘similar’ bonds


Bond Price Transparency

• MSRB and TRACE trade data is updated at regular intervals throughout the day to support bond price transparency functions

• Pricing transparency information is available interactively or in graphical report format

• Pricing data for sale-to-customer, dealer-to-dealer, and purchase-from-customer is shown (as available) for each selected security

• If pricing data is not available for a specific security, pricing information may be based on ‘similar’ bonds


Technology

DeskView is a client/server application based upon the .NET framework. A thin-client version of BondWave DeskView is currently in development.

The desktop/client software provides an intuitive, easy-to-use interface designed specifically for the fixed income service provider, trading desk, asset manager or other specialist.

The DeskView server application is installed on your server, behind your secure firewall.The server application is also the underlying platform for BondWave’s RepView and FirmView web-based applications. If desired, BondWave can provide the DeskView server application as a Software-as-a-Service (SaaS) to deliver these applications to your advisors or management team. In this scenario, the application runs on a BondWave server and is administered by BondWave Advisors.


Data Feeds

• Accounts and Holdings can be imported from either your in-house systems or your custody provider during an evening update

• Bond Offerings can be imported from any source, including your inventory, third-party broker-dealers and/or third-party ECNs

• Bond Descriptive Data and Ratings Information provides over 160 attributes for each bond security. These attributes are utilized for queries, analysis, strategy-based investing and other features within the application

• Material Event Data is utilized for inspections during the automated monitoring process and for related alerts and reports

• Trade activity and pricing (MSRB and TRACE) provides the basis for bond pricing analysis inquiries and reports.

Integration and Customization

• DeskView reports and electronic communication templates can be private-labeled with your firm’s logo and contact information - along with necessary disclosure statements

• Electronic correspondence/message templates may be reformatted or customized to your firm’s requirements

• Investment Strategies can incorporate your firm’s investment strategies, policies and compliance guidelines

• BondWave has developed many custom modules and integration links to our clients’ inhouse systems and we will review and consider your specific needs as part of an integration proposal.


Appendix I - Bond Offerings and Selection

Bond offerings can be imported into DeskView from any source(s), including your firm’s own inventory, third-party broker-dealers and/or third-party trading ECNs.

BondWave is impartial to both the source of bond offerings and the trade. We do not trade bonds and do not get paid on any trade activity.

When DeskView is deployed at your firm, BondWave provides software and related software support services on a per-account fee structure; we do not offer advice on any trades and are not involved with trade execution. While our platform provides capabilities to help filter bond offerings based on user inputs or strategy specifications, final bond selection in trade proposals and execution is coordinated between your fixed income team and the account rep / advisor in accordance with your firm’s established policies and procedures.


Appendix II - Bond Types and Strategies

DeskView receives multiple third-party data feeds that provide over 160 attributes for each bond security, such as rating, maturity, duration, purpose class and more (refer to “Appendix III - Bond Type Attributes” on page 20 for a complete list). DeskView utilizes these bond attributes within two unique technical constructs called Bond Types and Strategies to enable sophisticated functionality within the system’s query, reporting, monitoring and strategy-based investing features.

Bond Types

A Bond Type is a user-defined, saved filter that may consist of any combination of one or more of the 160+ bond attributes. The DeskView interface contains a Bond Type Manager function that allows specialists to quickly and easily create their own custom bond types.

The true power of Bond Types is how they are integrated throughout the DeskView platform to provide unmatched flexibility and power to filter holdings and offerings. Bond Types may be used as saved search filters in many of the DeskView query, reporting and monitoring features; they also form the building blocks of Strategies.

Example Bond Type

In the example below, a hypothetical Bond Type called ‘VA Muni 5Yr’ (Virginia Municipal 5 Year) has been created using five attributes, with specific filtering criteria assigned to each.

Any time the VA Muni 5Yr Bond Type is used in a system-wide search or as a Strategy filter, only bonds with matching criteria will be returned in the search results. This is a relatively simple example; a Bond Type may contain many more attributes if desired. DeskView also lets you create Complex Bond Types, with multiple levels of interdependencies to meet more stringent filtering requirements.


Strategies

Two general classifications of Strategies may be defined within DeskView.

• If an account is assigned to an Investment Strategy (optional), DeskView offers an integrated set of tools to facilitate proposals, portfolio construction, automated monitoring, rebalancing and reporting within the Investment Strategy guidelines.

• Inspection Strategies are utilized as part of the automated monitoring process and can be used as general inspections for holdings or accounts in the system. Inspection Strategies may also be used for report scheduling purposes.

DeskView includes a Strategy Manager function that enables specialists to create and maintain Strategy definitions.

Investment Strategies are comprised of 3 primary segments which may be customized according to your needs:

• Branches

• Restrictions

• Portfolio Targets and Limits

A hypothetical Strategy called the Virginia Municipal Ladder 5-14 (a basic 10-year bond ladder strategy) will be used as an example to illustrate the concepts involved.

Branches

Branches identify the Bond Types to include in the strategy. A Branch is like a ‘ladder rung’, ‘partition’, ‘bucket’ or ‘segment’ in which to allocate bonds within the portfolio. A Branch may contain one or more Bond Types and is given an allocation percentage weight in relation to other Branches within the Strategy.

In the Virginia Municipal Ladder 5-14 Strategy, we are using the VA Muni 5Yr Bond Type shown earlier for the first Branch (rung) in the bond ladder, followed by a Branch for each successive year of maturity in the ladder strategy. Each Branch includes a related Bond Type, and if we wanted an equal allocation in each rung in the 10-year ladder, each Branch would comprise 10% of the portfolio as a whole. Branches may be assigned any allocation percentage.


Restrictions

Restrictions indicate Bond Types that we want to exclude from the Strategy.

In the Virginia Municipal Ladder 5-14 Strategy, we want to exclude bonds that are subject to AMT, hospital revenue bonds, student loan bonds as well as any taxable bonds.

Portfolio Targets and Limits

Portfolio Targets and Limits provide statistical guidelines for the portfolio as a whole. DeskView provides a significant number of statistical parameters to govern portfolio structure.

In the Virginia Municipal Ladder 5-15 Strategy, we want to maintain no more than 10% cash, have no issuer saturation greater than 15%, and maintain an average duration of 10 years.

While a basic ladder Strategy like this would be applicable to some accounts, DeskView enables your firm to implement Strategies that combine more sophisticated investment allocation strategies along with firm investment policies and compliance guidelines.


Appendix III - Bond Type AttributesAdjustable / Floating RateAgency TypeAmount OutstandingBacking EntityBacking IndicatorBank Qualified StatusBenchmarkBond SizeCall FrequencyCalls DefeasedCapital TypeCategory of IssuerCollateralCollateral for IssueConditional Call FeaturesConduit Obligor NameCorporate SIC GroupCorporate SIC SubgroupCountry of IssuerCouponCoupon FrequencyCoupon MonthCoupon TypeCredit SensitivityCurrent Coupon RateCUSIPCUSIP DescriptionCUSIP ListDated DateDebt RankingDefault DateDefault EventDefault StatusDefault TypeDRDDurationEffective MaturityEnhancement TypeEscrow TypeExtraordinary RedemptionGuarantorIndustryInsuranceInsurer GroupISINIssue ClassIssue DateIssue Feature InfoIssue FeaturesIssue RatingIssue StatusIssuer DescriptionIssuer RatingLiquidation PreferredLiquidity Availability

Liquidity CreditLiquidity PricingLOC BankLOC ExpirationLOC TypeMake Whole BenchmarkMake Whole CallMake Whole End DateMake Whole ExtraordinaryMake Whole SpreadMake Whole YieldMaturityMaturity ExtensionMaturity TypeMBS IssuerMoody’s RatingMoody’s Short Term RatingMoody’s Underlying RatingMortgage InsuranceMunicipal BenchmarkMunicipal Maturity DescriptionMunicipal Maturity EventMunicipal Material Event DetailMunicipal Sinking FundNAICS Code PrimaryNAICS Code SecondaryNAICS SectorNAICS Sub SectorNext Reset DateNext Callable DateNext Callable PriceObligor NameObligor TypeObligor Type CodeOffering Type CodeOI AmountOptional Put TypeOptional Sink StartOriginal WAvg CouponOriginal WAvg MaturityOriginal Issue YieldOriginal Issue YieldOutlook Date Moody’s (Long Term)Outlook Date Standard & Poor’s (Short/Long Term)Outlook Direction Moody’s (Long Term)Outlook Direction Standard & Poor’s (Short / Long Term)Partial Call FrequencyPartial RedemptionPool NumberPool TypePricePrimary CurrencyProduct Type

Product Type DetailProject NamePurpose ClassPurpose DetailQualified Dividend IncomeRatingRating Change AgencyRating Change AmountRating Change DateRating Change TypeRedemption TypeREMICRule 144ASecurity Type Def Non USSecurity Type Non USSecurity Issue TypeSecurity Issue Type DefSectorSecurity ListSecurity TypeSinking Fund StartStandard & Poor’s RatingStandard & Poor’s Short Tem RatingStandard & Poor’s Underlying RatingSpecial Mandatory RedemptionSpecial Optional RedemptionST RatingStateState IssuerSupplemental Issue TypeTax Credit PercentageTax Credit RecipientTax Status - StateTax StatusTender TypeTickerTop Level TypeTRACE EligibilityTranche TypeUnderlying RatingWatch Date Moody’s (Long Term)Watch Date Standard & Poor’s (Short / Long Term)Watch Direction Moody’s (Long Term)Watch Direction Standard & Poor’s (Short / Long Term)Years to Effective MaturityYears to MaturityYears to Next CallYieldYield to CallYield to MaturityYTM-YTC SpreadYTM-YTW Spread