Omgeo Update 2008 BDUG Conference Kevin Arthur, Director, Fixed Income Markets A DTCC Thomson Reuters Company
Agenda 1) 2) 3) 4) Omgeo Introduction Current Environment / Trends Omgeo’s Business Focus Review of Omgeo products - ALERT, Central Trade Manager (CTM), OASYS, Trade. Suite 5) Municipal Securities • Low affirmation rate and the industry challenge • Question: What do Custodians see as impediments to affirmation of the ID Confirm? 2 BDUG Conference, September 15, 2008 Scottsdale Arizona A DTCC Thomson Reuters Company
About Omgeo is the global standard for efficiency, certainty and confidence in post-trade, pre-settlement operations. We create certainty in post-trade operations through providing automation for timely allocation, matching, confirmation and affirmation of the economic details of trades between investment managers, hedge funds, broker/dealers, and custodian banks. Our established, global community includes: • 6, 000 community members • 46 countries • 80 firms in partnership network 3 BDUG Conference, September 15, 2008 Scottsdale Arizona A DTCC Thomson Reuters Company
An established track record Omgeo Local Offices • Industry participation - Jointly owned by DTCC & Thomson Reuters - Board of Managers, Advisory Board, Working Parties (50+ firms represented) • Regulatory & depository relationships • Handling over 2. 0 million transactions per day - Will exceed 3 million fixed income allocations in 2008 • Managing over 2. 2 million settlement instructions on over 330, 000 accounts 4 BDUG Conference, September 15, 2008 Scottsdale Arizona Boston Chicago Frankfurt Glasgow Hong Kong London Manila New York Paris San Francisco Singapore Seoul Stockholm Sydney Tokyo Toronto A DTCC Thomson Reuters Company
5 BDUG Conference, September 15, 2008 Scottsdale Arizona Operational Performance Measurement A DTCC Thomson Reuters Company Custody Depository Reconciliation Post-Trade, Pre-Settlement of Securities/Cash Netting/Clearing 3 rd Party Notification Settlement Enrichment Trade Affirmation Matching Trade Confirmation Trade Allocation Trade Execution Pre-Trade Order IM/BD Negotiation IM-Decision of Trade Omgeo: Where do we fit in the trade process? Omgeo Settlement
Current Environment / Market Trends • CDO and Sub-Prime Challenges • FNMA/FHLMC • Municipal Securities • Auction Rate Securities, Concerns about Municipalities, Increased topic on Capitol Hill, Low affirmations rates • Mergers • BNY/Mellon, State Street/ ITG, JPMC/Bear Stearns, BOA/Countrywide, RBS /ABN • Changes in liquidity sources • NYSE Euronext, NASDAQ/AMEX, Turquoise, Dark pools, Proliferation of execution management (EMS) platforms, BATS • Retail SMA/Wrap/Wealth Mgmt • Shift in assets from traditional 401 k to SMA/UMA • Outsourcing • Retail SMA, Institutional, Hedge Funds • Fixed Income automation slowly catching up to Equities 6 BDUG Conference, September 15, 2008 Scottsdale Arizona A DTCC Thomson Reuters Company
Current Environment / Market Trends • Brazil, Russia, India, China (BRIC) • Emerging markets, Building out financial services infrastructure, US firms moving to emerging markets • Concerns about Derivative automation (Fed) • OTC, trade processing and confirmation • Regulatory pressure • OFAC, SOX, FINRA, SEC, increased Corporate Information Security • Heightened focus on Operational Risk • STP and risk management key focus areas • U. S. on a green path • Stop the paper…DTCC and Omgeo campaigns • Customers are looking for full automation of their trading book • Desire increased transparency, reporting and compliance on a global basis 7 BDUG Conference, September 15, 2008 Scottsdale Arizona A DTCC Thomson Reuters Company
Industry Challenge • What do we need to do as an industry become more efficient? • How do we deliver progress in today’s environment? • What are ways to add client value in the trade processing chain? • How do you differentiate your service offering in the current environment? 8 BDUG Conference, September 15, 2008 Scottsdale Arizona A DTCC Thomson Reuters Company
Omgeo Business Focus Committed to delivering robust and sustainable solutions for our global community of clients. • Continue to connect all market players including buy side, hedge funds, brokers, prime brokers and custodians into trade processing model for domestic and global trading activity • Automate trade processing from front office straight through to settlement facilities - Enable seamless interfaces to Omgeo from trading systems and OMS - Electronic interface from Omgeo to Depositories • US DTCC, Canada’s CDS, Japan’s JASDEC, Brazil’s CBLC • US Market - Enhancements to the electronic ID Confirm with Trade Suite ID 7. 1 • Automate and eliminate paper confirms - OASYS allocation processing • Continue to expand Fixed Income community 9 BDUG Conference, September 15, 2008 Scottsdale Arizona A DTCC Thomson Reuters Company
Omgeo Business Focus Areas • SSI - Support broad array of asset classes, allow for ease of access to data, ensure market practices are followed, validate as many data elements as possible to ensure accurate population • Deliver increased asset class coverage: - Fixed Income • Repo • TBA - Derivatives • Exchange Traded Derivatives (Futures, Options, Contracts for Difference) • Derivative Reconciliation • Collateral Management - Foreign Exchange (FX) • New markets: - Canada, Brazil, India, China 10 BDUG Conference, September 15, 2008 Scottsdale Arizona A DTCC Thomson Reuters Company
ALERT • Enhancements – Custodian View - FX SSI – Delivered in Q 3 2008 - United States Treasury Office of Foreign Asset Control (OFAC) Compliance – Q 4 2008 • ALERT will prohibit future use of OFAC sanctioned countries in the definition of settlement instructions - New Markets/Validations Release – Q 1 2009 • Expanded coverage of instruments, depositories and market rules • Tighter controls on existing instructions to increase data quality - UI Upgrade: Settlement Instruction (SI) View – Q 2 2009 • Improved SI UI page layout to help data quality and client understanding of the settlement chain - Expanded Audit Reporting – Q 3 2009 • Enhanced audit capabilities & more granular detail into IM activity when linking to custodian models - SI Market Rules Scan – Q 4 2009 • Assess compliance of custodian models 11 BDUG Conference, September 15, 2008 Scottsdale Arizona A DTCC Thomson Reuters Company
Omgeo CTM • Recent delivered enhancements - Third party notification • Allows up to 15 3 rd parties to receive SWIFT and CSV files - CTM Broker • Allows broker dealers to come onto CTM • Usage - July 07: 851, 812 allocations - July 08: 1, 650, 295 allocations - July 07: 100, 597 SN messages - July 08: 141, 800 SN messages 94% increase YOY; 399% increase since July 06 41% increase YOY - 350 clients on CTM globally as of August 08 (49% increase YOY) 12 BDUG Conference, September 15, 2008 Scottsdale Arizona A DTCC Thomson Reuters Company
OASYS • Recent enhancements - OASYS 5. 2 – Delivered to production • Enhanced Fixed Income, TBA; Enhanced Repo functionality - OASYS 6. 0 – Targeted delivery Q 2 2009 • Enhanced Fixed Income, Enhanced commissions management, BIC codes for Clearing Broker, Upgraded API's (Linux), Pre-note allocation to Custodian via Trade. Hub • Usage - Daily equity average: - Daily fixed income average: 13 180, 000 allocations 15, 000 allocations BDUG Conference, September 15, 2008 Scottsdale Arizona A DTCC Thomson Reuters Company
Trade. Suite – ID Confirm • Enhancements - Trade. Suite 7. 0 – ID Net, New Free Format Fields, Reg SHO; Enhanced Repo functionality - Trade. Suite 7. 1 – Elimination of paper confirms • Usage - Average daily trades/confirms: 1, 510, 527 - Daily equity average: - Daily fixed income average: 1, 403, 866 106, 661 - Confirm/Affirm (Trade. Suite): 1, 389, 302 - Central matching Daily Average 121, 225 14 BDUG Conference, September 15, 2008 Scottsdale Arizona A DTCC Thomson Reuters Company
Summary of Key Trade. Suite Projects • Paper Elimination - Trade. Suite Confirm Backer/Disclosure - Bond Market Association (SIFMA) – Task Force on Electronic Confirms • Subsequent interest expressed by equity markets - Trade. Suite Confirm Gap Analysis with Rule 10 B-10: add indicative fields, expand special instructions and enrich confirm from database of “housed disclosures” - Omgeo met with SEC and MSRB staff on November 1, 2007 regarding exemptive relief letter • SEC approval gained with No Action Letter on March 12, 2008 • Access of disclosure URL equals delivery • Target rollout by Q 4, 2008 • Continue to educate community – Ongoing • Trade. Suite Repo - Automation of trade confirmation messages for repo transactions - Types to be supported: Tri-Party, DVP/RVP and Buy/Sell Backs - Delivered on February 23, 2008 15 BDUG Conference, September 15, 2008 Scottsdale Arizona A DTCC Thomson Reuters Company
Summary of Key Trade. Suite Projects • ID Net - Working closely with DTCC to net institutional trades to streamline processing of growing equity trade volumes • SWIFT 2008 - Support all mandatory changes dictated by SWIFT • QC on the Web - Paper based reports will now be generated on line • Regulation SHO Phase 2 - For prime broker/ hedge fund enhanced processing - Phase 2: added 4 new reject reason codes specific to PB transactions to the Advice of Cancel Correction (AOCC) 16 BDUG Conference, September 15, 2008 Scottsdale Arizona A DTCC Thomson Reuters Company
Municipal Affirmation Rate - Industry Challenge Overview • Muni affirmation rates at only 66% vs. 89% on noon of T+2 • SIFMA dealers and Muni Operations Group concerned with low affirmation • MSRB requires affirmation, else dealer required to stop trading with client • SIFMA and Omgeo investigating reasons for low affirmation • Not all buy side firms affirm trades and often delegated to custodian / clearing agent • SIFMA working with dealer community • SIFMA and Omgeo engaging buy side firms Next Steps • Engage custodians at BDUG – Identify possible obstacles to affirmation - Breakout session delves into affirmation rates and barriers • Omgeo / SIFMA to set up discussion meeting with all groups, dealers, buy side and custodians 17 BDUG Conference, September 15, 2008 Scottsdale Arizona A DTCC Thomson Reuters Company
Muni vs. Non-Muni Affirmation Rates U. S. trade affirmation rates for July 2008 Non-Muni Trades Affirmed trades on T+2, Noon 89% 66% Un-affirmed trades on T+2, Noon 18 Muni Trades 11% 34% BDUG Conference, September 15, 2008 Scottsdale Arizona A DTCC Thomson Reuters Company
Lagging Muni Affirmation Rates What are some of the causes for low affirmation rates? Please take a moment to share your thoughts on why affirmation rates are so low and detail any roadblock or impediment 19 BDUG Conference, September 15, 2008 Scottsdale Arizona A DTCC Thomson Reuters Company
A DTCC Thomson Reuters Company
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