Q&A with Marianne Brown, Omgeo President and CEO
Marianne Brown, president and CEO of Omego
Marianne Brown, the president and CEO of Omgeo since November 2006, recently met with @dtcc to talk about Omgeo’s business strategy, expansion into new asset classes and her vision for the organization.
Omgeo, the global provider of automated post-execution institutional trade management services, is a joint venture between DTCC and Thomson Financial, a unit of The Thomson Corporation. Omgeo plays an increasingly critical role in the global securities industry as a central information and processing hub for institutional trades.
Before joining Omgeo, Brown served as CEO of the Securities Industry Automation Corporation (SIAC), then a wholly owned subsidiary of the New York Stock Exchange and the American Stock Exchange. Prior to working at SIAC, she was with ADP Brokerage Services Group, a division of Automatic Data Processing, for 26 years.
Omgeo is a joint venture with an unusual ownership structure in that DTCC is an industry-owned organization and Thomson Financial is a commercial entity. What has been your experience working in that environment?
Before taking this position, I spent a lot of time trying to understand the dynamics of the ownership structure, because the owners are so unique and different from one another. And I thought, holy mackerel, how can this be an effective partnership?
Well, I can tell you that it is amazingly effective because the differences between the two organizations are profoundly complementary from an Omgeo perspective. For example, DTCC provides Omgeo with data center services. Well, it just doesn’t get any better than that, because DTCC’s infrastructure is the epitome of reliability. And Thomson Financial has such a global reach that if Omgeo needs a physical presence in a particular market, we don’t have to worry about setting up the technical and administrative infrastructure. We are able to leverage Thomson Financial’s physical facilities.
So the uniqueness of our owners has been an enabler for Omgeo in that we are leveraging key assets of each organization. And the fact that Omgeo celebrated its five-year anniversary in 2006 says a lot about our owners, especially when you consider that an industry report indicates 80% of all joint ventures fail, with 60% of those doing so in the first five years. Today Omgeo is more successful than ever, and we expect to continue on this path.
Could you talk about how some of the trends in global markets relate to Omgeo?
There are a few global trends that are advantageous for Omgeo. One is that we’re seeing more cross-border transactions as opposed to a concentration of trading in local markets. Omgeo is in a unique place in that we offer solutions for both local-market and cross-border transactions, and we do business in 42 countries.
We also are seeing greater emphasis on value. The marketplaces are increasingly focused on solutions that offer quantifiable value, meaning greater cost-efficiency and risk mitigation, rather than allegiance to a particular national or regional solution. In today’s global market, objective value helps firms strengthen their competitive stance.
Omgeo has been expanding its fixed income business over the past several years. What is the company’s strategy for penetrating this market?
Omgeo’s sweet spot has always been in the equities marketplace, and now we’re making significant inroads in fixed income, as well. Since 2003, we’ve increased our fixed income volume by more than 300%. From 2005 to 2006 alone, we saw a 45% increase, and we’re tracking for strong expansion again in 2007.
[Note: Omgeo’s fixed income business automates post-trade, pre-settlement processing for cross-border, U.S.-domestic and non-U.S. domestic institutional trades across more than 20 instrument types, including repurchase agreements and U.S. and other government bonds. The services handle allocations, confirmations and matching, automatically communicating the details between investment managers and broker/dealers.]
To achieve this growth, we’ve been collaborating with a fixed income working group to grow our presence among existing customers. Basically we are looking to leverage our strong relationships with firms on the equities side to grow the fixed income side of the business. The firms in the working group provide excellent guidance on the functional requirements for processing more of their fixed income activities through Omgeo. In fact, the most recent enhancements made to Omgeo OASYS were based in large part on feedback directly from our fixed income clients. [Omgeo OASYS is the trade allocation and acceptance service for the U.S. market.] We also are tapping the experience of Thomson Financial, which has a significant fixed income business, as we develop strategies for this marketplace and look for opportunities to collaborate.
In early 2008, we plan to extend our fixed income focus with repo [repurchase agreement] functionality, which will complement FICC’s [Fixed Income Clearing Corporation] repo processing.
Could you talk about Omgeo’s relationships with depositories?
Depositories are a key link in the settlement chain. Once institutional trades processed through Omgeo are affirmed, we send them to the depositories with which we have interfaces for immediate settlement. So depositories are a very important channel for our business.
Obviously, we have an end-to-end processing relationship with DTCC’s depository in the U.S. market. We also have links with JASDEC [the Japanese central securities depository] and the Canadian Depository for Securities.
We believe, both intuitively and based on data for the U.S. market, that an end-to-end relationship is the ultimate in straight-through processing. So leveraging depository relationships helps Omgeo bring that value to other markets.
The link to Canada’s depository presents a particularly time-sensitive opportunity to focus on institutional trade matching. A new Canadian regulation that took effect this year, National Instrument 24-101, mandates more same-day institutional trade matching. This change makes our link to the Canadian depository more valuable because it enables us, via Omgeo Central Trade Manager [CTM], to help clients achieve best-in-class institutional trade matching rates for both domestic and cross-border trades.
We have a handful of early adopters signed on to utilize the link between Omgeo CTM and the Canadian depository. Next year, we will be adding some enhancements to Omgeo CTM and anticipate that our community in Canada will continue to grow as a result. We look forward to sharing the specifics of the new functionality in the first half of 2008.
What are other areas of opportunity for Omgeo?
The market’s increased asset class diversification continues to create significant opportunity for Omgeo.
Penetration in the hedge fund marketplace with Omgeo solutions has been phenomenal and a lot of the growth is through partnerships. Today, we have close to 160 hedge funds on our CTM solution, many of which are through hedge fund administrators. And as hedge funds expand, we see their needs changing. In the initial stages of their lifecycle, many hedge funds wanted a one-stop-shopping solution through a prime broker, which made them indirect customers of CTM. But as they grow larger, more are transitioning to multi-prime-broker relationships, and they will want to manage these relationships as direct customers of Omgeo.
We also are focused on commercial paper, as well as over-the-counter derivatives, developing solutions that complement DTCC Deriv/SERV. For example, we’re currently evaluating some specific opportunities within derivatives reconciliation that we expect to come to fruition in 2008.
You have described yourself as a “metrics freak.” Could you elaborate on that thought?
When a business is at its best from an operational efficiency perspective, it realizes countless benefits. When you are measuring the return on investment for every dollar you spend, it keeps the business crisp and focused. It fine-tunes your delivery skills and ensures your investment spending is well directed.
At Omgeo, we are very measurement-focused. We initiated a Continuous Process Improvement program when I joined the organization, and we’re constantly looking to raise the bar and challenge ourselves. This commitment to metrics is iterative and it’s a journey. And to measure progress, it’s also critical to set goals.
Goals provide a common framework of understanding so that every single associate [employee] is on the same page. In 2008, we will be instituting a direct linkage between goals and compen-sation so that all associates, in every part of the organization, know how their work affects the corporate object-ives and, there-fore, their compensation.
Omgeo has always done a fantastic job of having associates take ownership for their individual goals and objectives every year. I believe in creating an environment that rewards this ownership so that each associate comes to work every day inspired to deliver his or her best. This is something that has been part of Omgeo’s culture since its inception, but I have sharpened our focus on creating specific targets against which all associates can measure their own performance.
How would you describe your approach to managing Omgeo’s associates?
One of the things I learned from my long-time mentor and very good friend John Hogan during my ADP years is the connection between associate satisfaction, client satisfaction and, ultimately, business profitability.
Associate satisfaction being at the core of all good things, I was delighted to learn that the associate survey Omgeo conducted just before I joined had a 96% response rate, which is amazing. We were thrilled to identify areas where we’re strong, such as ethics, treating associates with respect and associates’ confidence in Omgeo’s future success. Associates also indicated very clearly the areas we needed to focus on, which we did over the past year. And we just closed out the most recent survey with a 99% response rate.
Now I’m eager to analyze this year’s responses, develop an action plan and communicate it to associates so that everybody knows I really am listening. Omgeo associates have tremendous knowledge and competence. It is my role to make sure they have the tools to do what they need to do.
You’ve been at Omgeo since November 2006. How’s it going?
I love my job. For starters, I’m running out of pages in my passport. My background was very U.S.-centric, so it’s fascinating to get more global and to develop a greater understanding of other markets – how they act, how they’re different and how they’re the same. I was more focused on the broker/dealer side of the business throughout most of my career, as well, so it has been terrific to gain exposure to investment managers and custodians as part of the client community. Omgeo is also doing a great job forging relationships with other segments within the client community, including hedge funds, private wealth and outsourcers.
I’m also having fun. When we sit around as an executive team and discuss opportunities – how to prioritize and make sure we’re focused on the right ones – I feel like I’ve died and gone to heaven. I say to everybody, let’s be sure to take a breath and recognize how cool this is. Just listen to what we’re challenged with – they’re all growth opportunities. This is spectacular. It just doesn’t get any better.
What are your expectations for Omgeo’s expansion over the next 2 to 5 years?
We see tremendous opportunities both geographically and across asset classes. We hope to further deepen our footprints in continental Europe, Japan and the rest of Asia, as those markets continue to mature and have more need for automation in the post-execution space.
Likewise, as investment strategies expand beyond equities and fixed income, Omgeo wants to be the go-to provider for solutions in those asset classes, be it by building functionality ourselves or by forging partnerships that allow us to offer best-of-breed solutions. The key is flexibility, and over the next few years we will exercise a strategy that will enable our clients to choose the right solutions for their needs. @