In an environment of increased competition, lower trading volumes and squeezed margins, financial institutions are increasingly finding themselves looking to market utilities for solutions to enhance operational efficiency, strengthen risk mitigation efforts and reduce post-trade processing costs. Paula Arthus, President and CEO of Omgeo, explains how Omgeo is continuing to innovate to serve these needs among its client base of investment managers, broker/dealers and custodians operating across 52 countries.
As you complete your first year as CEO, can you describe how Omgeo has helped grow the value of the services DTCC brings to the industry?
This is clearly an exciting time for all of DTCC’s businesses, including Omgeo. The industry is looking to market infrastructures like us for greater support in addressing the ongoing operational challenges financial firms face. The combination of DTCC and Omgeo brings together a complementary set of solutions, ranging from entity reference data management to settlement. As a result, we’re now in a position to drive a comprehensive, unified strategy for post-trade processing and settlement. The new ownership structure opens up new markets for us and creates a wealth of opportunities to drive innovation and collaboration to support the industry during this period of financial re-regulation and transformation.
Can you give an example that demonstrates how the business is leveraging synergies to further reduce risk and increase efficiency in post-trade processing?
Picking only one example is difficult, but I would have to say that the integration of Omgeo’s international buy-side clients with DTCC’s community of clients has helped foster increased collaboration on three major initiatives: supporting the industry’s move towards a T+2 settlement cycle in different markets globally, moving to same-day trade confirmation of institutional trades and rolling out “Settlement Matching” in the U.S. market. As I think about the different opportunities we see, I’m confident our ability to leverage interactions and expand asset class coverage and strategic partnerships will position DTCC as the industry’s leading, trusted partner in post-trade, pre-settlement services.
Improving service innovation for clients was a top Omgeo priority in 2014. Did this help you grow the business?
Without a doubt. We were delighted to see strong growth among many of our platforms and services last year. For example, the total equity and fixed income volumes processed by Omgeo Central Trade Manager℠ (Omgeo CTM) increased by 24%. Our client community also grew in 2014, particularly among the buy-side community, with the onboarding of an additional 100 firms. In addition, we’ve seen further interest in Omgeo CTM from market participants in the U.S., Japan, Canada and Australia. The strategic platform for the central matching of cross-border and domestic transactions continues to play an essential role in addressing challenges faced during trade lifecycle events. With the addition of new asset classes, such as synthetic equity swaps and repos, we expect this trend to continue in the years ahead.
Another of our products, Omgeo ALERT℠, also continues to deliver exceptional value for our clients. Today, close to 2,800 clients are using ALERT for storing and communicating more than 5 million Settlement Instructions across half-a-million accounts to their counterparties with an overall compliance rate of 97%. More than 450 investment managers leverage it for foreign exchange (FX) and cash standing settlement instructions (SSIs). The service currently holds close to 750,000 FX/Cash instructions and has a compliance rate of over 98%. It’s no wonder we continue to see robust interest in the industry’s largest and most compliant web-based database for the maintenance and communication of SSIs.
VALUES ARE IN MILLIONS
Omgeo’s partnership strategy has always been key to its growth and success. What would you consider the major highlights in 2014?
As new regulatory reporting requirements come online in many jurisdictions around the world, we are focused on enhancing our products and services to help meet our clients’ evolving compliance needs. In 2014, we announced that Omgeo ProtoColl®, the firm’s automated collateral and margin management solution, had built an interface to DTCC’s Global Trade Repository (GTR), which helps to address European Market Infrastructure Regulation (EMIR) requirements on collateral reporting. It does this by matching collateral with originating transactions or positions, and then reporting the consolidated data, such as legal entity identifiers (LEIs), in a GTR-standard format within the interface.
We also partnered with the London Stock Exchange Group’s UnaVista to support matching of synthetic equity swaps among executing brokers, prime brokers and investment managers. In doing this, we’ve created one of the largest equity swaps communities in the market. As I mentioned earlier, this is the direction we will head in the future – smart partnerships that allow us to meet multiple needs efficiently across as wide a community as possible.
A major accomplishment in 2014 was Omgeo gaining Board approval of its three-year strategic plan. Can you share some insight into the strategy and how it will help DTCC support the industry more effectively in the future?
Omgeo’s 2015-2017 strategic themes reflect our ongoing commitment to our clients as well as to market participants around the world that we help streamline and enhance their post-trade operations while continuing to deliver increasing value. To that end, our strategy builds on our core services, which are used around the world. We plan to assess these offerings continually to ensure that they evolve in tandem with client needs and regulatory requirements while also delivering increasing value, such as offering additional local market capabilities or asset classes. We’re also exploring how we can streamline workflows, partnerships and interfaces over time in order to make it easier to access Omgeo services. And, of course, we’re exploring how we can integrate our products and services further with other DTCC services.
Are there specific improvements or upgrades under consideration for Omgeo’s data stream?
We’ve just launched new global custodian capabilities in Omgeo ALERT. The release, ALERT 5.0, includes the Global Custodian Direct (GC Direct) offering, which enables global custodians to become the maintainer of accurate SSI data on behalf of their clients in an automated, secure and efficient manner. It enables both parties to a trade to use ALERT to source accurate SSI data. Currently, investment managers perform this action manually.
The launch of these new capabilities marks a key achievement in DTCC’s push to meet the industry’s call for this offering to become the industry-wide SSI Utility. Subsequent phases will expand asset class coverage in this service, as well as offer an enhanced API for third-party transaction services to retrieve real-time SSI information for their clients.