Transcript TradeSuite ID Price Announcement

BDUG Panel Discussion
Omgeo & DTCC
Driving Same Day Affirmation Rates:
Positioning for Settlement Matching &
Shortened Settlement Cycles
A DTCC Thomson Reuters Company
Industry Campaign to Drive “Trade Date Matching”
Multi-pronged effort leveraging pricing, new tools & consultation
Omgeo’s
multi-year plan
to raise SDA
rates and
lower costs
SDA Rates
Engage Clients
Provide Analysis
Tools
 Voice of client
 SDA analytics
Offer Economic
Incentives
 Billing & usage
 Affirmation incentives
 Best practice price
Support for
alignment
Industry Initiatives
 Settlement Matching
 BCG & DTCC study
 SDA & Central Matching
 Prime Brokers
 Custodians
 Brokers
 Institutions
Driven by SIFMA
Objectives
 Eliminate reclaims
 Shorten settlement cycles
 Increase affirmation rates
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A DTCC Thomson Reuters Company
SDA: Alignment with Industry Best Practices
Incenting Same Day Affirmations (SDA) & Central Matching
T
Supporting industry initiatives to
facilitate settlement finality & shorten settlement cycles –
SDA & Central Matching recognized as key building blocks to
achieving industry goals
T
.
T+1,2
T+1,2
94%
($)
T+3+
T+3+
5%
75%
n/a
1%
($)
19%
38%
n/a
6%
n/a
($)
51%
11%
T+1,2
T
T+3+
($)
n/a
n/a
($)
n/a
n/a
($)
($)
n/a
n/a
Omgeo Community
TradeSuite ID
OTM & CTM
($)
n/a
($incentive/transaction)
Omgeo’s Affirmation Incentive Program Driving Higher SDA
Settlement
Custodian
Broker
PDQ SETTLEMENT
50%
47.5%
40%
Performance %*
Omgeo Pricing Incentive**
%
30%
DTCC
($)
20%
CTM/Central Match Workflow
10%
OTM/Central Match Workflow
Confirm Affirm Workflow
0%
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*Omgeo Internal Data June 2012 (US)
04
05
06
07
08
09
10
11
Post-Execution Pre-Settlement
Investment
Manager
12
Effective Date for Omgeo’s Affirmation Incentive Program
13
**Per billed transaction
A DTCC Thomson Reuters Company
Omgeo Confidential
Same Day Affirmations Provide Higher Value
Implementing price reductions & incentives
TradeSuite ID PRICE CHANGES
Based on 2012 & 2013 Approved Price Changes (Affirmed Transactions Only)
Workflow
Price
w/ SDA
w/Tier
(Standard Aggregated
Vol
Client Impact
Reductions
Discount
Discount
Transaction Costs)
Confirm/Affirm
24%
18%
26%
34%
Broker & Custodian
Prime Broker
24%
20%
34%
43%
Prime Broker
Broker Custody (SMA)
29%
30%
30%
40%
Broker & Custodian
Oasys Trade Match*
17%
38%*
43%
48%
Broker & Custodian
6% Miscellaneous: Other DTCC Ineligible Confirms (Fed, Foreign, etc.)
* Auto-Affirm Transactions Only
OMGEO & DTCC Transaction Cost Matrix
Based on 2012 & 2013 Approved Price Changes
Affirmed/
Affirmed
Exempted
Reclaim Rates
Omgeo Transaction
Workflow
DTCC Settlement
Service
Combined Cost
Differential
0.2% Reclaim Rate
Confirm/
Affirm
SDA
OASYS
Confirm/
TradeMatch Affirm
SDA
T+2
Unaffirmed
1.7% Reclaim Rate
5.0% Reclaim Rate
OASYS
TradeMatch
T+2
Confirm/
Affirm
OASYS
TradeMatch
Confirm/
Affirm
OASYS
TradeMatch
PDQ
PDQ
PDQ
PDQ
DO
DO
NDO
NDO
0%
0%
+4%
+8%
+114%
+116%
+32%
+72%
A DTCC Thomson Reuters Company
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Omgeo Confidential
SDA Analysis: Key Omgeo Target Segments
Focus on the “Affirming Parties” (Institutions & Agents)
Prime
Broker
24% of Total Vol
37% of DTCC Vol
Confirm
Affirm
24% of Total Vol
37% of DTCC Vol
OTM
Central Match
17% of Total Vol
26% of DTCC Vol
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


Affirmations controlled by Prime Broker
Highly concentrated target group
Highly automated processes
Precedent set for high SDA rates




Affirmation rates influenced by Custodian
Very broad client segment
Perception affirmations cost more
IMs not receiving confirms (manual processes, global clients, etc.)




Affirmations automated by TradeMatch, in most cases
“Auto Affirm” transactions yield highest SDA rates
“Match-only” configuration inhibitor to SDA rates
Allocation and Broker input timing a factor
5
A DTCC Thomson Reuters Company
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Omgeo Confidential
SDA Analysis: Workflow Breakdown
Confirm Affirm vs. Central Match (OTM)
100.00%
Broker Input Rate on T
90.00%
80.00%
Affirmation Rates
70.00%
60.00%
SDA Rate
T+2 Rate
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
Total
100%
Confirm Affirm
74%*
OTM
26%
DTCC Eligible Volume
* Includes Prime Broker Volumes
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Note: Based on August data
A DTCC Thomson Reuters Company
SDA Analysis: Prime Broker
Low SDA rates, high T+2 rates
Top Volume Prime Brokers
(Performing Role of Institution & Agent)
100.0%
90.0%
T+2 Industry Ave
Affirmation Rates
80.0%
70.0%
60.0%
50.0%
SDA Industry Ave
40.0%
30.0%
20.0%
10.0%
0.0%
1
In Random Order
7
2
3
4
5
6
7
8
Above Average SDA Rate
Below Average SDA Rate
Above Average T+2 Rate
Below Average T+2 Rate
A DTCC Thomson Reuters Company
SDA Analysis: Agent Banks
Above average SDA, low T+2 rates
Top 10 Volume Agent Banks
(Combined Confirm Affirm & OTM Workflows)
100.0%
90.0%
T+2 Industry Ave
Affirmation Rates
80.0%
70.0%
60.0%
50.0%
SDA Industry Ave
40.0%
30.0%
20.0%
10.0%
0.0%
1
2
3
4
5
6
7
8
9
10
In Random Order
Above Average SDA Rate
Below Average SDA Rate
Above Average T+2 Rate
Below Average T+2 Rate
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A DTCC Thomson Reuters Company
SDA Analysis: Institutions
Central Match driving higher affirmation rates
Top 10 Volume OTM Institutions
(Central Match Workflow)
100.0%
90.0%
T+2 Industry Ave
Affirmation Rates
80.0%
70.0%
60.0%
50.0%
SDA Industry Ave
40.0%
30.0%
20.0%
10.0%
0.0%
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2
3
4
5
6
7
8
9
10
Top 10 Volume Confirm Affirm Institutions
In Random Order
Above Average SDA Rate
Below Average SDA Rate
Above Average T+2 Rate
Below Average T+2 Rate
(Agent Affirming as Institution or on Behalf of Institution))
100.0%
Affirmation Rates
90.0%
T+2 Industry Ave
80.0%
70.0%
60.0%
50.0%
SDA Industry Ave
40.0%
30.0%
20.0%
10.0%
0.0%
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9
2
3
4
5
6
7
8
9
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A DTCC Thomson Reuters Company
SDA Analysis: Increasing SDA in Short Term
Initial findings and recommendations
Prime Brokers
 3 of top 8 have 89%+ SDA rate - 4 are below average w/high T+1
 Move affirmation timings from early T+1 to late on T
 Target 5 high volume clients to achieve above average rates
Confirm Affirm
 Exhibits lowest SDA rates, especially “Agent as Institution”,
“Agent affirming party”
 Work with Custodians to explore inefficiencies
 Make recommendations and target potential savings
 Target high volume clients to achieve above average rates
OTM Institutions
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 Auto Affirm” yield highest SDA but anomalies exist “Match Only”
clients yield lowest SDA
 Move “Match Only” to “Auto Affirm” & investigate anomalies
 Work with Brokers & Custodians to explore inefficiencies
 Target low SDA clients to achieve above average SDA rate
A DTCC Thomson Reuters Company
Potential SDA Improvements
Targeting select Prime Broker, Custodians & Institutions
70.00%
17% Increase
60.00%
50.00%
OTM Institutions
40.00%
Confirm Affirm Institutions
Prime Broker
30.00%
Current
20.00%
10.00%
0.00%
May
11
June
July
A DTCC Thomson Reuters Company
Introducing New Data Service in 2014
“Omgeo SDA Analytics”
 Guide for Omgeo SDA reviews & client consultation process
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
Identify weaknesses
Make recommendations
 Flexible ongoing client analysis tool
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Affirmation rates and performance
Operating efficiencies
Counterparty efficiencies & performance
 Determine institutional set-ups & workflows
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Evaluate PDQ settlement rates
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Breakdown of delivers vs receives
Identify exemption rates
Clarify TradeSuite ID invoices
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Workflows (i.e. Confirm/Affirm vs. OTM)
Matching processes, (i,e, “Auto Affirm” or “Match only”)
Affirming party (who did the Affirmation?, Agent or Institution?)
Identify client internal accounts (AIA, BIA, etc.)
Transaction volumes by workflow category, asset class, client type, etc.
Bill types, affirmation discounts, etc.
A DTCC Thomson Reuters Company
SDA MISSION: Benefits to the Industry
Eye on US market readiness
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Settlement
Matching
Efficiencies




Supports settlement finality via “Passive Matching”
Reduces risk of reclaims
Reduces fails & settlement risk
Enables operating efficiencies – middle & back offices
SSC
Preparedness

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

Meets requirement for T+1 settlement
Reduces systemic market risks
Enables more streamlined STP
Reduces credit risk
Cost
Reduction




Omgeo transaction costs
Operational costs – middle and back office
Fails and related financing costs
Cost benefit from SSC (BCG Study)
A DTCC Thomson Reuters Company
Thank you
[email protected]
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A DTCC Thomson Reuters Company