Can Data Grids Deliver STP for Canadian Banks and Asset Managers?

1. Can Data Grids Deliver STP for Canadian Banks and Asset Managers? Case Study

2. Agenda • Who is Hyla Anyway? • What Problem are we trying to solve? • What is our solution STPGrid? • What did we learn from the pilots and early deployment?

3. Who is Hyla? • Founded 2002 in Ottawa • Veteran management team, venture-funded • Two years of product design/development • STPGrid Pilots in 2Q 04 Mission: deliver faster, cheaper, better IT solutions Using 21st-century architectures

4. Hyla Mission • Hyla IS an award-winning enterprise software product team that takes on the BIG problems. • Our RESEARCH shows that the only growth market for software is SMEs, BUT selling/servicing SMEs is suicidal with existing software models and platforms.. • SO in 02-04 we built “Hylamatrix”, an advanced autonomic software platform tailored for SMEs. • NOW in 04-08 we can deploy network-based business process solutions to SMEs with minimal development and support cost.

5. Problem: STP is Stalled “The overall level of preparedness for implementing STP and the of commitment towards institutionalizing STP by 2005 appears low.” Source:Canadian Securities Administrators STP Readiness Assessment, Sept 2003 “Even a free software product is not guaranteed to sell to second and third-tier investment firms, many of which are happy with faxing and phoning and are averse to change.”

6. Barriers to STP • Inertia • We’re waiting to see what the industry as a whole does in 2005” • Complexity • “Our IT department is on maternity leave” • Cost • “We’ve never paid for communications before – why should we start now?”

7. Custodial Landscape • 20+ large global custodian banks • 8,000 N. American IMs (90% US) • most of IMs are small/midsized

8. Paralyzing Misconception The cost of improving the process is greater than the benefits.. a new solution and business model is needed! STP Investment for 2002, 2003 and 2004 Percent who have or anticipate NO INVESTMENT (STP Readiness Survey)

9. Priority: IM Acceptance Make it simple and cheap for IMs • No Software • No installation, no consultants, no training • No intermediary • peer to peer: direct connection between IM and custodian • Reasonable investment • spread costs fairly between custodians and IMs on a ‘pay-as-you-go’ basis

10. Our Radical Vision • We build smart, autonomous agents to perform all core functions of enterprise software “Middleware is obsolete if there is no middle” 2. We deploy these agents broadly over the Internet, embed them invisibly into the user’s desktop and maintain them remotely “IT is a utility like hydro” 3.We break down existing IT business models and create new ones based on a performance-pricing model “We get paid after we deliver value”

11. Business Process

12. Hylamatrix Platform “[Hyla] has created a multi-faceted software platform capable of translating many forms of information into a common format. It sounds esoteric but the platform is proving to be of immense practical value to [customers].”Ottawa Citizen, 9/30/04 • Patent-pending grid/autonomic framework • Supports a set of compact, invisible IT services • Pre-built library of core business services • Requires only Windows XP (.Net) • Self-installing, self-updating over Internet

13. IM Benefits • consistency with industry standards (reduced embarrassment) • cost reduction (reduced fees) • risk reduction (reduced errors)

14. IM Signup Process • Talk with Hyla via phone & email • Sign connection agreement (2 pages) • Send sample trade files • Install software on your Windows PC • Answer questions (maybe tidy trades) • Provide add. trades for testing • Test and go-live with custodian

15. Custodian Benefits • Extends STP to small IMs cost-effectively • Offers competitive alternative to FMCNet for mid-sized IMs • Allows custodian IT staff to design and deploy new customer services easily • Provides immediate compliance with ISO15022, XML, and CCMA “Best Practices” • Supports proprietary custodian interface formats (higher-quality reporting)

16. STPGrid Pilot 2Q 04 3 IMs, 1 custodian • To provide a uniform environment for the pilots, Hyla installed STPGrid on a generic sub-$1000 office PC, running Windows XP. • Each investment manager then provided Hyla via email a recent trade report file. • Some of these files were ‘exports’ from complex Portfolio Management Systems (PMS), while others were hand-built Excel spreadsheets. (Based on the pilot users, Excel is definitely the industry’s most popular PMS.) • Hyla staff then wrote rules files (configuration files) which ‘taught’ STPGrid how to parse the investment manager’s trade report.

17. STPGrid as “Middleware”

18. Purified Trade Data • Neutral Format based on • CCMA Best Practices (Dec 03) • SWIFT SMPG • ISITC • ISO20022 • XML

19. Pilot Feedback "With my many other duties, it’s really a joy to send trades to our custodian using STPGrid. It’s simply ‘drag and drop’. That’s all there is to it!" Rita Tiltina,  Rogan Investment Management "STPGrid's approach of using light weight software agents to manipulate and transport information over the internet provides an ideal solution for our STP strategy."  Bill Chow, YMG Capital Management

20. STPGrid Status • Engaged 12+ custodian banks, mostly U.S. • “You guys are the only ones that can reach the mass of my IMs” • 4 actively promoting STPGrid to IMs • Interviewed 300+ investment managers • 25% - 40% of IM firms using manual processes • FMCNet big player in Canada (50%) • U.S. more fragmented (Omgeo, Swiftnet, DTC)

21. STPGrid Economics

22. Beyond Settlement After improving STP rates for settlement New services will include • Automated Reconciliation • Broker Communications • Corporate Actions

23. Questions?