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Stock exchange integration and the need to increase operational efficiency

Stock exchange integration and the need to increase operational efficiency. Thomas Trepanier, Director 3 rd ACSDA Leadership Forum Buenos Aires, Argentina November 2011. Omgeo LLC.

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Stock exchange integration and the need to increase operational efficiency

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  1. Stock exchange integration and the need to increase operational efficiency Thomas Trepanier, Director 3rd ACSDA Leadership Forum Buenos Aires, Argentina November 2011

  2. Omgeo LLC Omgeo LLC is a global joint venture of the Depository Trust & Clearing Corporation (DTCC) and Thomson Reuters. It is the strength and resources of these two, influential organizations that inform and underpin our innovative, market-leading work.We have partnered with 700 investment manager and more than 1,600 broker dealer clients across 46 countries worldwide, working with them to create automated solutions that improve the speed and efficiency of their post-trade processes. Our expertise enables investment managers, broker/dealers and custodian banks to simplify their operations, with advanced technologies that speed up transaction processing, reduce costs and minimize risk. Our network of resources and depth of expertise enables us to keep our clients at the forefront of a fast-evolving industry, and our close partnerships with regulators enable us to ensure that all industry standards are met.

  3. Local Market Infrastructure:Current Observations & Challenges • However, post-trade operations are still often manual and tend to fall behind in terms of automation: • Streamlining post-trade operations from trade confirmation through settlement increases accuracy and reduces costs and risks through increased operational efficiency. • This would help participants decrease settlement risk and improve operational efficiency. • Promoting STP in post-trade operations: • As Direct Market Access (DMA) and algorithmic trading become more popular, trading systems increasingly diversify themselves. • Front offices turn to automated processes for their operations to manage an increasing number of transactions. • Key challenges: • Trade participants are under increasing pressure to lower risk, whilst simultaneously achieving both cost and time efficiencies • Need across markets for reliable technology to minimize delays. Processing capacity is also critical to handle peak volumes. • Market participants are now looking to have the workflow and trade status communicated to them in real time regardless of the time zone or domicile. • Need for central matching of allocations and confirmations. This would remove manual intervention and consequently reduce operational risk.

  4. Local Market Infrastructure:How Firms Measure Efficiency / Counterparty Perspectives • 25% of Investment Managers use fails as a key efficiency measure • Exception Mgt/Matching (including fails)- 56% • Transaction Volumes- 16% • Benchmarking-13% • Speeds, Frequencies, & Quality Stats- 7% • Other- 7% • 29% of Custodians use fails as a key efficiency measure • Exception Mgt/Matching (including fails)- 36% • STP (Manual vs. Electronic Trades)- 24% • Cost of Exceptions- 12% • Transaction Volumes- 10% • Benchmarking- 10% • Other- 7% • 22% of Broker/Dealers use fails as a key efficiency measure • Exception Mgt/Matching (including fails)- 57% • Transaction Volumes- 13% • STP (Manual vs. Electronic Trades)-11% • Speeds, Frequencies, & Quality Stats- 11% • Other- 8%

  5. Local Market Infrastructure: Counterparty Pain Points • Investment Manager • Managing External STP & Connectivity- 25% • Managing Fixed Income / Derivatives & Product Complexity- 21% • Managing Technology Upgrades & Infrastructure- 21% • Data Management / Standards / Corporate Actions-18% • Other- 13% • Custodian • Generating Industry Priority, Critical Mass & Incenting Automation- 31% • Data Management / Standards / Corporate Actions- 23% • Managing Technology Upgrades & Infrastructure- 15% • Client Reporting and Customization, Managing FI / Derivatives & Product- 15% • Complexity- 8% • Internet- 8% • Broker/Dealer • Generating Industry Priority, Critical Mass & Incenting Automation- 18% • Data Management / Standards / Corporate Actions- 17% • Managing Fixed Income / Derivatives & Product Complexity- 13% • Managing Technology Upgrades & Infrastructure- 11% • Managing External STP & Connectivity- 11% • Streamline Post Trade / Pre Settlement- 9% • Fail & Exception Reporting- 8% • Other- 13%

  6. Austria, Belgium, Czech Rep., Denmark, Finland, France, Germany, Greece, Ireland Italy, Luxembourg, Netherlands, Norway, Portugal, Romania, Russia, Spain, Sweden, Switzerland, UK China, Hong Kong, India, Indonesia, Japan, Pakistan, Malaysia, Singapore, South Korea , Taiwan, Thailand Bermuda, Canada, Mexico, USA Israel, Turkey, UAE Egypt, South Africa Brazil Chile Australia New Zealand Omgeo Cross Border Products Used In46 Countries Globally

  7. Post Trade Workflow Omgeo ALERT SSI Database Omgeo CTM Block Investment Manager Block 2. Notice of order executed Break-down Allocations Broker Confirmation Confirm Messages Stock Exchange Affirm Settlement Notification via SWIFT and Flat File MQ Interface 3rd Party via SWIFT 3. Block 1. Order Input Custodian Bank 9/ Trade Notification 9. Trade Notification 10. Release for Settlement Central Depository 11. Settlement Notification 11. Settlement Notification

  8. Local Market Infrastructure: Links Between Omgeo and Central Depositories • Links in the Future • Brazil • Chile • Colombia • India • México • Perú • Pakistán • South Africa Links Today • Canada – CDS • EuroCCP • Japan – Jasdec • South Korea – KSD • United States – DTCC

  9. Local Market Infrastructure: Beneficios del Central Trade Manager (CTM) • CTM enables you to take advantage of the following: • Affirmation rate of 90 percent on the same day of the trade (T) • Affirmation rate of 95 percent on the day after the trade (T+1). Affirmation rates rise above 94 percent by mid-day of T+2 • The ability for an investment manager to match their cross-border trades on T enables them to book their foreign exchange (FX) transactions in a timely manner. Liquidity volumes are more present in the spot FX market compared to the next day or same day market. • The use of CTM enables the investment manager to recover transactions on T instead of T+2 or T+3.

  10. Local Market Infrastructure: Affirmation Percentage in Central Trade Manager

  11. Omgeo LLC Thank You

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