2007 Is Just Around the Corner For Underwriting Customers
Denise Russo, DTCC director, Asset Services
Urgent is the word Denise Russo uses when speaking about customers and the reengineering of DTCC’s underwriting system. It’s urgent that customers plan and prepare for the new platform, and it’s urgent to begin now.
"The reengineering is not something firms can prepare for in a week or a month,” said Russo, DTCC director, Asset Services. "We’re implementing a unified, end-to-end platform from issuance through the entire asset servicing life cycle, so the changes are enormous. This means our customers need to prepare their front and back offices and their systems for the new platform."
SOURCE of efficiency
DTCC’s reengineering project, which will bring significant new efficiencies to the industry, is one of the most ambitious undertakings in the organization’s history. It entails redesigning the core systems for securities underwriting and corporate actions with a single new platform called the DTCC SOURCE – Securities Origination Underwriting & Reliable Corporate Actions Environment.
SOURCE will be rolled out in phases beginning next year. Underwriting will be the first system to launch, in mid-2007, followed by the corporate action system in 2009.
The DTCC SOURCE: Where to Learn More
DTCC has developed a package of materials for customers with information about the reengineering project, how customers and the industry will be impacted and what customers need to know and do in the coming months.
For underwriting customers, the materials include a rundown of major system and process- flow changes; new procedures; a checklist for planning for the changes; and examples of asset classes and communications methods.
To access these and other materials about this initiative, visit DTCC’s reengineering Website at www.dtcc.com/reengineering or contact Denise Russo, DTCC director, Asset Services, at drusso@dtcc.com or 212.855.3731.
Connectivity decisions
Over the past several months, DTCC has been conducting customer outreach programs and meeting with industry associations to discuss the underwriting platform and distribute information and checklists for the project.
Some of the major decisions customers face deal with connectivity. Underwriters need to decide which electronic communication method they will use to connect to DTCC’s depository for each asset class, such as certificates of deposit, various forms of corporate debt, equities, municipal bonds and securitized debt.
"All of our underwriting customers must determine how they want to communicate deal information to the depository," said Russo, noting that this decision will be influenced partly by whether the underwriter is global, national or regional. "Will they use an external bookbuilding/ running system such as Bondesk Syndicate or Dealogic? Will they use a direct connection to the depository? Or will they use the new platform’s Web-based screens?"
Once firms make this decision, a host of other issues arise. For instance, if customers select an external system, they must ensure the supplier understands the business requirements and the timing involved in testing and implementing the new connection.
An underwriter that opts for a direct connection to the depository will need to obtain and understand file layout specifications, establish connectivity with DTCC’s SMART network and schedule testing, training and implementation with the depository.
Some of the changes
The new underwriting system will include a centralized, automated system that will gather information from underwriters on new bond and securities issues and distribute it electronically in real-time to bond market participants. It will make trade confirmation, clearing and reporting easier, faster and more accurate.
"We still have customers who make phone calls and fax hard copies when making an issue eligible. This new system will completely change the way they do business, doing away with paper and moving the customer into real time," said Russo. "It’s a bit like stepping out of the 19th century into the 21st."
The implementation of SOURCE will require firms to make many other changes. For example, to accelerate and streamline the underwriting process, and to support regulatory requirements, customers will have to give the depository their underwriting information earlier and in greater detail. In addition, offering documents will need to be digitized for ease of handling.
Time is the scarcest resource
Earlier this year, a senior vice president of operations at a financial services firm said, "One of the great challenges DTCC faces with the reengineering project is the fact that the deliverables are quite a ways off. It’s hard to get people in our industry to worry about something that going to happen next year or in 2008."
This is a challenge that DTCC has to meet, said Russo. Which gets back to the word "urgent." @