The announcement this week that Swift will be launching a new “range of initiatives” targeted at the standing settlement instructions (SSI) space is obviously part of the network operator’s new 2015 strategy to get into the reference data space, but it also represents yet another competitive bid to eat rival Omgeo’s lunch. The planned SSI repository and directory will therefore compete directly for business with Omgeo’s Alert solution set.
Last year, Swift announced at Sibos that it would be stepping into the securities matching space, thus pitting its offering against Omgeo’s Central Trade Manager (CTM) platform, which has been the market leader in the matching space for some time. Some questioned the move due to the fact that most of the market has already connected to CTM and there could be additional costs in connecting to another platform. For example, one Sibos delegate told me that there would need to be sufficient incentive in terms of pricing to compel such a move.
Now, Omgeo is therefore facing competition on two new fronts from Swift: SSIs and securities matching. To be fair though, this announcement should come as no surprise to the post-trade solution vendor, UK Swift MD Arun Aggarwal was talking about both matching and SSI initiatives back in August last year, along with other reference data items such as legal entity IDs and securities IDs. At the time, Aggarwal referred to the 2015 strategy as one focused on the mantra ‘less is more’, but it seems that has meant a much ‘more’ competitive approach to the reference data and post-trade processing space overall.
It will be interesting to see how the SSI initiative fares in comparison to Omgeo’s Alert, which has also been around for quite some time. Much like its securities matching project, it will have to develop a compelling business case and competitively priced solution offering if it hopes to succeed.
Moreover, Omgeo is certainly not taking this new development lying down. As indicated by my recent chat with John Burchenal, managing director of market growth at the vendor, the recent partnership with Markit Document Exchange (MDE) is just one of its initiatives this year to increase its competitive proposition to the market. It made the smart decision to partner with a vendor that already has a strong proposition in the wider reference data space and has experienced a high degree of growth (and connectivity to key parts of the market) over the last few years. As Burchenal said: “Everybody knows Markit in the derivatives space for its valuations, reference data and analytics offerings and they have been doing a lot of work in the document space for some time.”
Rather than go down the lengthier and more costly build route, Omgeo instead opted to partner with Markit because of the amount of traction MDE has achieved thus far in the market. It will be interesting to see whether Swift opts for a similar partnership.
Omgeo Alert will also be adding legal entity data to its remit in the near future and is aiming to develop into more of a reference data led product. To this end, Burchenal indicated that Omgeo will continue to look for best of breed providers to extend Alert’s reach in certain markets over the course of this year, but it will also look to develop its own in-house functionality.
Swift’s bid in the legal entity identification race with the Bank Identifier Code (BIC) is likely have some impact on its competitive positioning with regards to Omgeo in this space. If it gains the approval of the Office of Financial Research (OFR) to become the new legal entity ID standard and operate a reference data utility with partner the Depository Trust and Clearing Corporation (DTCC), as indicated by its recent proposals, its chances of success in the reference data space overall will improve. If it fails, however, then that will likely impact its own approach (as BIC is one of its key ‘less is more’ strategic initiatives) and its market perception overall.
I also look forward to seeing reference data being discussed much more at this year’s Sibos, given this strategic push. Let’s hope there’s a panel with Swift and Omgeo on it to debate the issues this time!