With COVID-19 this year impeding and curtailing travel and international trade flows, it’s worth noting the segment of global business activity that continues to function at high volumes and without disruption: securities trading. Financial markets experienced exceptionally high volatility in March and April as the pandemic spread but the robust functioning of trading and post-trade processing systems reinforced the industry’s confidence in them.
During this period one of the market’s most impactful post-trade solutions, CTMTM for trade matching, saw volumes nearly double compared to 2019 daily averages and hit record levels for US and cross-border equity and fixed income trades. Despite this amount of activity, CTM’s match-agree rates remained consistently high, proving the value of automated tools in periods of volatility.
We’ve come to take for granted this high level of efficiency in post-trade activity -- particularly in trade matching -- over the past two decades. It has helped boost the volume of cross-border as well as domestic trading. With CTM about to turn 20 years old, it’s worth reflecting on the reasons behind this success story.
Numbers Tell the Tale
I helped launch the service in 2001, so CTM’s anniversary really hits home for me. At the time I knew CTM provided a great service that met an obvious industry need but I never could have predicted it would become the world’s leading post-trade workflow engine.
Just look at a couple of key numbers. The first is CTM’s trade-date match rate of 96%. The share of trades matched on the service today are at this level or above, which is a formidable achievement and a reason trade flows have become so efficient.
The second number is 2,000, which represents the population of CTM counterparties across the globe, from 52 different markets -- making this the largest user community for any matching service.
The composition of this user base is another notable feature of CTM. It spans the buy-side, sell-side and custodian banks. This size, depth and breadth means that the CTM community is self-propagating: additional users sign on in order to instantly access their counterparties in both established and growth markets. And this community increases the value of the service by contributing their data and integrating the CTM workflows into their ecosystems.
CTM hasn’t become the industry’s standard by standing still; the service has evolved since its launch in ways that have made it increasingly beneficial to users.
One of the most notable benefits have resulted from its integration with DTCC’s broad suite of institutional trade processing services. A game-changer for the industry came with the combined power of utilizing CTM with ALERT®, DTCC’s central database of account and standing settlement instructions (SSIs). This integration enables users to automatically enrich their trades with the most up-to-date SSIs and account information. Thanks to the contributions of users, ALERT contains over 9 million settlement instructions across asset classes and geographic markets. And CTM is the only matching service offering this integration. Combining this golden-sourced enrichment with matching creates an authoritative trade record that ensures all settlement parties will be notified with the same instruction – thereby ensuring settlement finality.
Our latest service innovation, ALERT Key Auto Select (AKAS), adds a free, rules-based smart enrichment feature to CTM, helping those clients utilizing it to further streamline and reach a true state of optimal no-touch processing.
CTM is also enabled to support a full range of connectivity options, including API, FIX and file-based connections, which has accelerated the growth of CTM’s user base by providing a seamless interface with counterparties across all segments and markets irrespective of their size or level of technical sophistication.
As always, we listen to and partner closely with our clients in order to enhance our post-trade offerings in response to their evolving needs. These clients have been clear; they want one platform to manage the entire trade lifecycle, from trade agreement through to settlement finality. So we enhanced CTM’s support for US trade flows, providing clients the ability to migrate their US trade flow volume off of our US domestic service, OASYS, and onto CTM. This eliminates a redundant platform and additional touchpoint to provide clients with that single central matching engine.
Serving the Industry
While CTM’s features have helped drive the remarkable community uptake of the service over the past two decades, there’s an additional factor that differentiates this service from other solutions and reinforces users’ trust in it. I’m referring to DTCC’s model of ownership and governance: being owned and governed by the industry influences every aspect of how we operate -- from product development and delivery to client support and risk management. The design and continuous improvement of CTM supports not only users’ needs for efficiency but also the industry’s safety and soundness.
In the end it’s the clients we serve who make the best case for CTM and how it has strengthened the global trading system. One of them summed it up recently when he told me that CTM helps him “sleep better at night.” Why? Because he knows his trades will be settled the next morning.
This article first appeared in Global Investor/FOW on December 15, 2020.