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Omgeo’s Matthews Talks up Data and Risk Management for 2009

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Post-trade specialist Omgeo is set to get even more involved in the area of data and risk management this year, according to Steve Matthews, Omgeo’s director of product strategy. To this end, the firm has recently appointed three new executives to focus on the area of data management, especially with regards to its web-based global database for the maintenance and communication of standing settlement and account instructions (SSIs), Omgeo Alert.

Over the last few months, the firm has also been busy with various add ons and upgrades to its centrally hosted, exception management solution, CrossCheck. In March, it added an automated data feed between CrossCheck and the Depository Trust & Clearing Corporation’s (DTCC) post-trade database for OTC derivatives, the Trade Information Warehouse. According to the vendors, the link is designed to reduce operational risk by allowing market participants to align their OTC derivatives portfolios with contract records maintained by the DTCC’s database.

In February, the firm unveiled its solution for counterparty risk management, based on its ProtoColl collateral management and CrossCheck portfolio reconciliation offerings. The combined platform is aimed at helping clients gain insight into their firms’ exposures and risk profiles by automating the processes around collateral management and portfolio reconciliation.

“There has been an increased focus on risk management from our client base and operational risk has become a key area of investment in the current market,” says Matthews. “Counterparty risk in particular is a real issue and the buy side is wary of the reputational risk it faces if it does not deal with this issue.”

He reckons that a back to basics approach has been adopted by many to focus on the business fundamentals, such as client service and automation. “We see the current market climate as an opportunity for an increase in the safety and soundness of the market. We can help to reduce these operational risks by providing same day affirmation and central matching via our Central Trade Manager (CTM) platform,” he says.

In August last year, the vendor completed a number of functionality improvements to the settlement notification feature of its core central matching platform, CTM. The upgrades, which were part of the firm’s plans to improve client interaction with all the parties to their trades, included the addition of new message types to the service and a more intuitive front end.

The work on the platform will continue this year, says Matthews. “We will be adding new asset classes to CTM, including exchange traded derivatives and foreign exchange,” he says.

“We have also been looking at investment in new areas such as collateral management and reconciliation of collateral positions. Our acquisition of Allustra plays into this space and we continue our significant investment in CTM and Alert,” adds Matthews.

The firm acquired London-based provider of collateral management solutions Allustra in September last year, along with the license for a derivatives portfolio reconciliation platform from Global Electronic Markets (GEM). As part of the deal, Mark James, managing director of Allustra, joined Omgeo’s executive committee as managing director.

Allustra’s suite of products are aimed at providing customers the ability to consolidate trade positions across asset classes, including OTC derivatives, and to manage the collateral process that mitigates the associated counterparty risk. Omgeo hopes that by joining GEM’s derivatives reconciliation capabilities with Allustra’s collateral management solution, it will be able to provide customers with a combined derivatives product line. There are likely to be a number of releases and upgrades to Omgeo’s solution set in the derivatives area later this year.

In Europe, Matthews explains that the firm is focusing on the hedge fund community and prime brokers. The CTM platform is also a key focus for 2009: “CTM is experiencing the biggest growth at the moment and we are currently focused on migrating brokers from our old platform Oasys Global to CTM. There has been strong interest in the migration from our user community thus far and a number of major brokers have committed to using the system already. There are a number of early adopters and projects are currently underway. In the second half of the year, we will communicate more information on the migration programme and phasing for the rest of our clients to move to CTM.”

The firm has also committed time and resources to the world of SSIs. In April, Omgeo appointed three new executives to its European product team to focus on this area: State Street’s Bill Meenaghan and Janet Coughlan and Steve Higgins, both from UBS. Coughlan is now in charge of strategic initiatives for Omgeo Alert, whereas Higgins and Meenaghan have both been appointed product managers in the data management space.

“Alert has also seen interest this year and we had a release in March that improved the data quality of the solution by providing enhanced validations for SSIs,” continues Matthews. “There is a need for consistency of data in the current market and for standard market practices to be adopted and our upgrade was part of this endeavour resulting our validations being consistent with global standard market practices.”

Omgeo is also looking at adding more new markets and new asset classes, as well as new tools in the data management area, he explains. “For Alert, we are also looking at the legal entity identification feeds space.” It is likely that Coughlan, Meenaghan and Higgins will be focused on these initiatives in their new roles.

According to Omgeo, the appointments are part of its plans to strengthen its regional product offerings by getting closer to its customers. “To understand what our clients want, we have advisory boards in each of the regions in which we operate and these feedback to us valuable information around client paint points, requests for improvements and added functionality,” adds Matthews.

The hedge fund community is particularly concerned with regulatory developments at the moment, from the big players right down to the small, he continues.

Regulation is a constant concern, but risk management has also reared its head as a key focus for 2009, Matthews adds. “There has been a lot of focus on risk management but the relative sophistication of enterprise-wide risk management varies considerably across the industry. Chief risk officers and compliance officers have more high profile roles than ever before and it is interesting to see that they are getting involved in the collateral management space. Although we anticipate increased cooperation between compliance and risk, I see the benefits of retaining these two areas as separate and complimentary functions.”

For now, it seems that Omgeo has more than enough to be getting on with.

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