Test drive
The charter users are two Citigroup divisions - Smith Barney Consulting Group and Global Transaction Services (GTS) - along with technology provider Vestmark. All three companies are interacting with the new managed accounts system to become familiar with how it operates. The Citigroup divisions have been successfully interacting through DTCC's communications gateway, transmitting sample messages to DTCC servers and receiving acknowledgements in return.

"The test environment allows users to test the service's connectivity, the process and the protocol," said Paul Bucaoto, DTCC director, product management. "We are making significant progress in moving toward a full launch of the service."

'Tremendous interest'
There is a renewed sense that the time is right for industry standards and a centralized, automated service for managed accounts, said Ann Bergin, DTCC managing director and general manager, Distribution Services.

"We're seeing tremendous interest from sponsors, managers and service providers who understand what DTCC has done to help other markets achieve scalability and cost efficiencies," said Bergin. "They see the potential our Managed Accounts Service has for helping them to grow this area of their business as well."

As more firms link to DTCC's service, they in turn create linkages to a growing network of affiliated participants. For instance, GTS currently has nine investment manager firms that will connect to DTCC's platform, Smith Barney has more than 200 investment managers in its consulting program and Vestmark services more than 20 firms.

Lowering barriers to entry
Dana Fowler, director of operations for Smith Barney Investment Advisory Services, expects DTCC's service to open new relationships between sponsors and investment managers. "For those who may have been deterred by the complexities and costs of retail managed accounts, this is a great way to get into this market," Fowler said.

First priority: new account process
A priority for DTCC is to address the new account process. This is considered the industry's most significant issue because the customized portfolios in each managed account have hundreds of data elements that must be shared with multiple investment managers.

The investor's profile, restrictions and investment strategy must be relayed to as many as a dozen different investment managers, along with funding data, authorization to trade and other important details. Sharing that client data currently requires separate comm-unications to multiple participants, along with phone calls and faxes.

"There is significant risk of error, as well as concern about transmission of confidential information through non-secure channels," said David Gardner, DTCC's external project director for the Managed Accounts Service. "It can require days or even weeks and hundreds of dollars to set up a new account. It's an unwieldy and costly process."

The Managed Accounts Service collapses these steps into one message that contains all the data required for a new account, and automatically transmits that information to multiple parties in one step. "You can see the appeal of one process and one message," Gardner explained. "And the investor's funds are put to work in a fraction of the time it takes now." @