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BDUG Panel Discussion Omgeo & DTCC Driving Same Day Affirmation Rates: Positioning for Settlement Matching & Shortened Settlement Cycles. Industry Campaign to Drive “Trade Date Matching” Multi-pronged effort leveraging pricing, new tools & consultation. - PowerPoint PPT Presentation
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A DTCC Thomson Reuters Company
BDUG Panel DiscussionOmgeo & DTCC
Driving Same Day Affirmation Rates: Positioning for Settlement Matching &Shortened Settlement Cycles
A DTCC Thomson Reuters Company2
Driven by SIFMA Objectives
Support for Industry Initiatives
Offer Economic Incentives
Provide Analysis Tools
Engage ClientsSDA Rates
Eliminate reclaims Shorten settlement cycles Increase affirmation rates
Settlement Matching BCG & DTCC study SDA & Central Matching
Affirmation incentives Best practice price
alignment
Voice of client SDA analytics Billing & usage
Prime Brokers Custodians Brokers Institutions
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
A DTCC Thomson Reuters Company3
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($)
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($)
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($)
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($)
($)
11%
6%
1%
51%
19%
5%
38%
75%
94%
SDA: Alignment with Industry Best PracticesIncenting Same Day Affirmations (SDA) & Central Matching
Custodian
InvestmentManager Broker
Omgeo Community
TradeSuite ID
OTM & CTM
Post
-Exe
cuti
on
Pre
-Sett
lem
en
tS
ett
lem
en
t
PDQ SETTLEMENT
DTCC
TT+1,2
T
T+1,2
T+3+
T T+1,2 T+3+
($incentive/transaction)
Supporting industry initiatives tofacilitate settlement finality & shorten settlement cycles –
SDA & Central Matching recognized as key building blocks to achieving industry goals
.
CTM/Central Match Workflow
OTM/Central Match Workflow
Confirm Affirm Workflow
Performance %*%
Omgeo Pricing Incentive**($)
*Omgeo Internal Data June 2012 (US) **Per billed transaction
Omgeo’s Affirmation Incentive Program Driving Higher SDA
Effective Date for Omgeo’s Affirmation Incentive Program04 05 06 07 08 09 10 11 12 13
0%5%
10%15%20%25%30%35%40%45%50%
48%
Omgeo Confidential
T+3+
A DTCC Thomson Reuters Company4
TradeSuite ID PRICE CHANGESBased on 2012 & 2013 Approved Price Changes (Affirmed Transactions Only)
Workflow(Standard Aggregated
Transaction Costs)Vol
PriceReductions
w/ SDADiscount
w/TierDiscount
Client Impact
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
Same Day Affirmations Provide Higher ValueImplementing price reductions & incentives
6% Miscellaneous: Other DTCC Ineligible Confirms (Fed, Foreign, etc.)
* Auto-Affirm Transactions Only
OMGEO & DTCC Transaction Cost MatrixBased on 2012 & 2013 Approved Price Changes
Reclaim Rates
AffirmedAffirmed/Exempted
Unaffirmed
0.2% Reclaim Rate 1.7% Reclaim Rate 5.0% Reclaim Rate
Omgeo Transaction Workflow
Confirm/AffirmSDA
OASYS TradeMatch
SDA
Confirm/Affirm
T+2
OASYS TradeMatch
T+2
Confirm/Affirm
OASYS TradeMatch
Confirm/Affirm
OASYS TradeMatch
DTCC Settlement Service
PDQ PDQ PDQ PDQ DO DO NDO NDO
Combined Cost Differential
0% 0% +4% +8% +114% +116% +32% +72%
Omgeo Confidential
A DTCC Thomson Reuters Company55
Affirmations controlled by Prime Broker Highly concentrated target group Highly automated processes Precedent set for high SDA rates
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
Affirmation rates influenced by Custodian Very broad client segment Perception affirmations cost more IMs not receiving confirms (manual processes, global clients, etc.)
Prime
Broker
Prime
Broker
Confirm
Affirm
Confirm
Affirm
OTM
Central Match
OTM
Central Match
SDA Analysis: Key Omgeo Target SegmentsFocus on the “Affirming Parties” (Institutions & Agents)
24% of Total Vol
37% of DTCC Vol
24% of Total Vol
37% of DTCC Vol
17% of Total Vol
26% of DTCC Vol
Omgeo Confidential
A DTCC Thomson Reuters Company6
100% 74%* 26%
SDA Analysis: Workflow BreakdownConfirm Affirm vs. Central Match (OTM)
DTCC Eligible Volume
Total Confirm Affirm OTM0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
* Includes Prime Broker Volumes
Note: Based on August data
Broker Input Rate on T
Affi
rmat
ion
Rat
es
SDA Rate
T+2 Rate
A DTCC Thomson Reuters Company7
1 2 3 4 5 6 7 8
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
SDA Analysis: Prime Broker Low SDA rates, high T+2 rates
Top Volume Prime Brokers(Performing Role of Institution & Agent)
SDA Industry Ave
T+2 Industry Ave
In Random Order
Affi
rmat
ion
Rat
es
Above Average SDA Rate
Below Average SDA Rate
Above Average T+2 Rate
Below Average T+2 Rate
A DTCC Thomson Reuters Company8
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
SDA Analysis: Agent BanksAbove average SDA, low T+2 rates
1 2 3 4 5 6 7 8 9 10
SDA Industry Ave
T+2 Industry Ave
In Random Order
Top 10 Volume Agent Banks(Combined Confirm Affirm & OTM Workflows)
Affi
rmat
ion
Rat
es
Above Average SDA Rate
Below Average SDA Rate
Above Average T+2 Rate
Below Average T+2 Rate
A DTCC Thomson Reuters Company9
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
1 2 3 4 5 6 7 8 9 100.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
1 2 3 4 5 6 7 8 9 10
Top 10 Volume OTM Institutions(Central Match Workflow)
Top 10 Volume Confirm Affirm Institutions(Agent Affirming as Institution or on Behalf of Institution))
SDA Analysis: InstitutionsCentral Match driving higher affirmation rates
SDA Industry Ave
T+2 Industry Ave
SDA Industry Ave
T+2 Industry Ave
Affi
rmat
ion
Rat
esA
ffirm
atio
n R
ates
Above Average SDA Rate
Below Average SDA Rate
Above Average T+2 Rate
Below Average T+2 RateIn Random Order
A DTCC Thomson Reuters Company10
SDA Analysis: Increasing SDA in Short Term Initial findings and recommendations
Prime Brokers
OTM Institutions
Confirm Affirm
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
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
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 Company11
May June July0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
OTM Institutions
Confirm Affirm Institutions
Prime Broker
Current
17% Increase
Potential SDA ImprovementsTargeting select Prime Broker, Custodians & Institutions
A DTCC Thomson Reuters Company12
Guide for Omgeo SDA reviews & client consultation process Identify weaknesses Make recommendations
Flexible ongoing client analysis tool Affirmation rates and performance Operating efficiencies Counterparty efficiencies & performance
Determine institutional set-ups & workflows 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.)
Evaluate PDQ settlement rates Breakdown of delivers vs receives Identify exemption rates
Clarify TradeSuite ID invoices Transaction volumes by workflow category, asset class, client type, etc. Bill types, affirmation discounts, etc.
Introducing New Data Service in 2014“Omgeo SDA Analytics”
A DTCC Thomson Reuters Company13
Cost
Reduction
Settlement Matching
Efficiencies
SSC
Preparedness
SDA MISSION: Benefits to the IndustryEye on US market readiness
Omgeo transaction costs Operational costs – middle and back office Fails and related financing costs Cost benefit from SSC (BCG Study)
Supports settlement finality via “Passive Matching” Reduces risk of reclaims Reduces fails & settlement risk Enables operating efficiencies – middle & back offices
Meets requirement for T+1 settlement Reduces systemic market risks Enables more streamlined STP Reduces credit risk
A DTCC Thomson Reuters Company14
Thank [email protected]