Real-Time Message Interface Streamlines Prime Brokerage Settlement
National Securities Clearing Corporation (NSCC) and Omgeo will implement a new real-time message interface for Prime Brokerage activity, including municipal securities, in early July.
The interface, an improvement from the existing batch process which operates between NSCC, a DTCC subsidiary, and Omgeo, a joint venture of DTCC and Thomson Financial, connects NSCC’s Continuous Net Settlement System (CNS) and Omgeo’s TradeSuite System. The TradeSuite/CNS interface is an option that streamlines the processing of Prime Brokerage trades.
Prime Brokerage activity includes a variety of services that many clearing firms provide for clients, including securities lending, leveraged trade executions, and cash management. The interface for Prime Brokerage activity was developed largely in response to hedge funds, which place large trades and are involved in many activities including buying and selling on margin and lending and borrowing securities.
“This effort to streamline settlement for Prime Brokerage activity is made in support of the securities industry’s continued straight-through processing efforts,” said Peter Inguanta, director, DTCC’s Product Management. “This change enables NSCC to continue its efforts to mitigate the impact of external system failures or backlogs as a result of heavy volumes. Should the market be disrupted for any reason, real-time trade submission helps ensure that the number of Prime Brokerage executed but unsubmitted trades is kept to a minimum or eliminated. NSCC already provides a real-time message interface for the New York Stock Exchange, American Stock Exchange and the Nasdaq stock market transactions.”
Currently, equities, corporate bonds and Unit Investment Trusts (UITs) are eligible for the TradeSuite/CNS interface, but in conjunction with the new real-time message interface, municipal bonds will be processed for the first time.
Customer reaction to the enhancement was positive. “It’s great that DTCC and Omgeo are adding munis at the same time they are implementing a real-time interface,” said Godfrey Moore, technical director, Settlement Operations, Charles Schwab & Co. “Anyone familiar with the Prime Broker flip to CNS process should be happy.” Among the benefits Moore cited were “reduction in reclaims, reduction in buy-ins, better fail control environment, reduced cap charges, reduction in re-cap transactions, reduced delivery order charges, and automatic partials.”
The Regional Interface Operation (RIO) – which is the actual trade recording application that receives the real-time data feed before CNS – and its machine-readable output (MRO) and reports will be enhanced to reflect new values for municipal bonds, corporate bonds, and Unit Investment Trusts (UIT). Previously, they were identified as debt securities only.
Inguanta said NSCC participants should see if they need to make some minor system and work flow changes to accommodate municipal bonds. The new real-time interface, however, will be transparent to the industry. Testing for the enhanced interface has begun and participants are encouraged to begin testing before the interface implementation next month. @
[Editor’s Note: For detailed output and reporting changes, participants should review NSCC Important Notice A6011 posted on April 19, 2005. For more information on the TradeSuite/CNS interface for Prime Brokerage, please call you Relationship Manager or e-mail Peter Inguanta at pinguanta@dtcc.com.]