Driving Same Day Affirmation Rates Positioning for Settlement Matching amp Shortened Settlement Cycles SDA Rates Eliminate reclaims Shorten settlement cycles Increase affirmation rates Settlement ID: 695531
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Slide1
BDUG Panel Discussion
Omgeo & DTCC
Driving Same Day Affirmation Rates:
Positioning for Settlement Matching &
Shortened Settlement CyclesSlide2
SDA Rates
Eliminate reclaims
Shorten
settlement cyclesIncrease affirmation rates
Settlement MatchingBCG & DTCC studySDA & Central Matching
Affirmation incentivesBest practice price alignment
Voice of clientSDA analyticsBilling & usage
Prime BrokersCustodiansBrokersInstitutions
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 costsSlide3
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($)
($)
11%
6
%
1%
51%
19%
5%
38%
75%
94%
SDA: Alignment with Industry Best Practices
Incenting Same Day Affirmations (SDA) & Central Matching
Custodian
Investment
Manager
Broker
Omgeo Community
TradeSuite ID
OTM & CTM
Post-Execution Pre-Settlement
Settlement
PDQ SETTLEMENT
DTCC
T
T+1,2
T
T+1,2
T+3+
T
T+1,2
T+3+
($incentive/transaction)
Supporting industry initiatives to
f
acilitate settlement finality & shorten settlement
c
ycles –
SDA & Central Matching
r
ecognized as key building blocks to achieving industry goals
.
CTM/Central Match Workflow
OTM/Central Match Workflow
Confirm Affirm Workflow
Performance %*
%
Omgeo Pricing Incentive**
($)
*Omgeo Internal Data June 2012 (US) **Per billed transaction
Omgeo’s Affirmation Incentive Program Driving Higher SDA
Effective Date for Omgeo’s Affirmation Incentive Program
Omgeo Confidential
T+3+Slide4
TradeSuite ID PRICE
CHANGES
Based on 2012 & 2013 Approved Price Changes (Affirmed Transactions Only)
Workflow(Standard Aggregated Transaction Costs)VolPriceReductions
w/ SDADiscountw/TierDiscount
Client ImpactConfirm/Affirm 24%
18%26%34%
Broker & CustodianPrime 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 r
eductions & incentives6% Miscellaneous: Other DTCC Ineligible Confirms (Fed, Foreign, etc.)* Auto-Affirm Transactions OnlyOMGEO & DTCC Transaction Cost MatrixBased on 2012 & 2013 Approved Price Changes
Reclaim
Rates AffirmedAffirmed/Exempted
Unaffirmed
0.2% Reclaim Rate1.7% Reclaim Rate
5.0% Reclaim RateOmgeo Transaction Workflow
Confirm/AffirmSDAOASYS TradeMatchSDA
Confirm/AffirmT+2OASYS TradeMatchT+2
Confirm/AffirmOASYS TradeMatch
Confirm/AffirmOASYS TradeMatch
DTCC Settlement ServicePDQ
PDQPDQ
PDQ
DO
DONDO
NDOCombined Cost Differential0%
0%
+4%
+8%
+114%+116%
+32%
+72%
Omgeo ConfidentialSlide5
5
Affirmations controlled by Prime Broker
Highly concentrated target
groupHighly automated processesPrecedent 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 ratesAllocation and Broker input timing a factor
Affirmation rates influenced by CustodianVery broad client segmentPerception affirmations cost moreIMs not receiving confirms (manual processes, global clients, etc.)
Prime
Broker
Confirm
Affirm
OTM
Central Match
SDA Analysis: Key Omgeo Target Segments
Focus 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
Vol26% of DTCC Vol
Omgeo ConfidentialSlide6
100%
74%*
26%
SDA Analysis: Workflow BreakdownConfirm Affirm vs. Central Match (OTM)DTCC Eligible Volume* Includes Prime Broker Volumes
Note: Based on August dataBroker Input Rate on TAffirmation RatesSDA RateT+2 RateSlide7
1 2 3 4 5 6 7 8
SDA Analysis: Prime Broker
Low SDA rates, high T+2 rates
Top Volume Prime Brokers(Performing Role of Institution & Agent)
SDA Industry AveT+2 Industry AveIn Random OrderAffirmation Rates
Above Average SDA RateBelow Average SDA RateAbove Average T+2 RateBelow Average T+2 RateSlide8
SDA Analysis: Agent Banks
Above average SDA, low T+2 rates
1 2 3 4 5 6 7 8 9 10
SDA Industry AveT+2 Industry AveIn Random Order
Top 10 Volume Agent Banks(Combined Confirm Affirm & OTM Workflows)Affirmation RatesAbove Average SDA RateBelow Average SDA RateAbove Average T+2 RateBelow Average T+2 RateSlide9
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 ratesSDA Industry AveT+2 Industry AveSDA Industry AveT+2 Industry Ave
Affirmation RatesAffirmation RatesAbove Average SDA RateBelow Average SDA RateAbove Average T+2 RateBelow Average T+2 Rate
In Random OrderSlide10
SDA Analysis: Increasing SDA in Short Term
Initial findings and recommendations
Prime BrokersOTM Institutions
Confirm Affirm
3 of top 8 have 89%+ SDA rate - 4 are below average w/high T+1Move affirmation timings from early T+1 to late on TTarget 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 inefficienciesMake recommendations and target potential savingsTarget 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 inefficienciesTarget low SDA clients to achieve above average SDA rateSlide11
17% Increase
Potential SDA Improvements
Targeting select Prime Broker, Custodians & InstitutionsSlide12
Guide for Omgeo SDA reviews & client consultation process
Identify weaknesses
Make recommendationsFlexible ongoing client analysis toolAffirmation rates and performance Operating efficienciesCounterparty efficiencies & performanceDetermine 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 ratesBreakdown of delivers vs receivesIdentify exemption rates
Clarify TradeSuite ID invoicesTransaction volumes by workflow category, asset class, client type, etc.Bill types, affirmation discounts, etc.Introducing New Data Service in 2014“Omgeo SDA Analytics”Slide13
Cost
Reduction
Settlement Matching EfficienciesSSC
PreparednessSDA 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 riskSlide14
Thank you
Gregory.johnston@omgeo.com