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Morgan Stanley Enters 2nd Phase Of TAP-Based SMS Project

Morgan Stanley & Co. has moved onto the second phase of its plan to install an enterprise-wide securities master service, following the completion of the first part of the project within its retail brokerage operation. The installation – dubbed Securities Master Service (SMS) – makes use of Vancouver-based TAP Solutions’ TAPmaster reference data management platform.

Morgan Stanley began implementation of the first phase back in May. Since then, it has created a centralized database that will feed normalized data from multiple sources to a wide range of applications. These applications previously drew upon discrete security master files – designed to satisfy their specific requirements – which made comprehensive and consistent updating of fields within the files difficult.

According to John Fleming, managing director of retail operations at Morgan Stanley, speaking at a Microsoft-hosted industry briefing in New York, the next phase will involved expanding the SMS concept to other data types beyond securities descriptive data.

Specifically, SMS will next be applied to managing client and prospect data. Subsequent phases call for adding management of so-called document data. This is essentially Morgan Stanley’s business rules for trading, including restrictions on ownership of certain types of securities, qualifications for trading on certain types of account and descriptions of securities that can be purchased for specific portfolios.

The SMS project is a key element of a broader Morgan Stanley plan to bring true straight-through-processing to its retail operations. While the initial phase has concentrated on the relatively calm waters of the former Dean Witter retail brokerage, the SMS concept may well be applied to the deeper and rougher seas of Morgan Stanley’s investment banking and broker/dealer operations. As such, the project is a substantial one, and the industry’s eyes will certainly be upon it.

For TAP Solutions, then, the project is a substantial coup. The small Canadian vendor had to beat off serious competition to some very large organizations in order to win the deal last spring. The company secured its first major deal in the reference data space last spring at Abel Noser (Reference Data Review, May 2004).

At the briefing, Fleming explained the business rationale behind the SMS project. The firm, he said, wanted to improve STP rates and brought Fleming in to spearhead its approach. After assessment of the situation, Fleming concluded that the largest impediment to achieving STP was data, and making data available to the applications that needed it.

Having decided to attack Morgan Stanley’s data challenges, Fleming set up a list of priorities. He started with securities data, then turned to terms and conditions, pricing, corpor-ate actions, tax and attributive data, including industry sector, investing style and ratings information used in the money management process.

The retail brokerage platform in place at Morgan Stanley was essential that of Reynolds, a broker that was acquired by Dean Witter to form Dean Witter Reynolds, which itself was bought by Morgan Stanley. The Reynolds platform was an early example of industry automation initiated in the 1960s. As such, data was stored in many different vehicles, including databases (DB2, VSAM) and flat files. Typically, this data was updated by different groups, according to their functions needs. The result was a fractured data structure, making it difficult for a financial advisor to ascertain, say, the taxability of a particular security. 

In rebuilding the brokerage’s data structures, Fleming set out to make available all the vendor data the firm subscribed to and receive to anyone within the firm who needed or wanted to access it. Fleming’s vision was to put data into the hands of Morgan Stanley’s financial advisors via the tools they used to do their job.

Fleming, who admits to a natural preponderance to buy rather than build, turned to TAP Solutions after learning about the company at an industry event. He concluded that TAP’s value proposition, in terms of data model design, fit well with his rapid deployment timeframe. According to Fleming, after he made a cost/benefit presentation regarding the project to senior management in February, it took only until May to go live with the initial phase of the TAPmaster rollout.

The SMS project has allowed Morgan Stanley to make all of its data online, including for distribution to clients. In order to figure out how to achieve this, Fleming began with accounts receivable, to identify which vendors the company was paying. He then studied the appropriate vendor contracts to check what the firm was permitted to do with the various packages of data it was receiving, yet wasn’t necessarily using optimally.
The driving concept behind the project, Fleming said, is establishing data as a utility. “Security master is not a competitive advantage,” he said. “It’s what you do with it” When data is viewed in this way, he said, it no longer becomes an argument over which source is better, Morningstar, Barra or GICS. Rather, SMS allows Morgan Stanley to offer access to all three, and allow the final user to decide.

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