Post-trade solution provider Omgeo has partnered with derivatives data specialist Markit to connect Omgeo’s standing settlement and account instructions (SSI) database Alert to Markit Document Exchange (MDE), the latter’s online document storage platform. John Burchenal, managing director of market growth at Omgeo, explains to Reference Data Review that the vendor opted to partner rather than to build its own in-house capabilities due to client feedback and the comprehensive coverage of MDE, which was launched back in 2008.
“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,” says Burchenal. “We’ve been following that work pretty closely because we’ve had customers for some time asking us whether we’d be able to store counterparty documentation on Alert.”
Rather than go down the build route, Omgeo instead opted to partner with Markit because of the amount of traction MDE has achieved thus far in the market. “For us it made sense in the current market environment, rather than having another service to fragment the space even further by building a new technology in Alert, to partner with Markit. Many of our customers were also MDE clients and they questioned the wisdom of building a new infrastructure in an environment that requires more consistency and standardisation. Markit complement our strengths and we complement theirs,” elaborates Burchenal.
To this end, Omgeo brings to the table its relationships with its buy side client base; an obvious attraction for MDE in its bid to expand its client reach further, especially in light of its move to extend further down the data value chain. Back in March last year, Markit indicated that MDE is aiming to eventually become a one stop shop for all the data needed from the buy side by providing reference data extraction and validation services. The vendor is therefore keen to extract value out of the documents stored on its platform, which was established in order to allow financial institutions to post, manage and share these compliance, counterparty credit and regulatory documents securely.
Lansing Gatrell, co-head of MDE, who took over from ex-MDE head Penny Davenport back in November, indicates that another driver for Markit in joining forces with Omgeo is also to increase the STP rates across the industry. “By linking Markit’s offering with Alert’s customer base, MDE can help the industry make significant progress towards true, end to end STP,” he explains.
On the subject of Omgeo’s STP credentials, Burchenal adds: “We standardise processes in the post-trade world and this is something that the documentation space is in great need of. The idea is to get all these standardised processes in one place and then get a critical mass of clients on board so that operational and counterparty risks are reduced and efficiencies and lower costs are achieved.”
All trading relationships begin with an onboarding process that includes the exchange of documents required for compliance, which is where MDE first staked its market offering. By linking the documents on MDE to the accounts on Omgeo Alert, the vendors claim that the sell side can identify the counterparty, access its associated documents and efficiently open an account. This is particularly relevant when a trade is allocated to an account that is undocumented (or not fully opened) by the sell side. Speeding the onboarding process lowers operational cost and reduces settlement times and the risk of failed trades, according to Markit and Omgeo.
The vendors have spent a lot of time consulting with each other and their respective customers about the functionality these clients hope to see from the partnership, according to Burchenal. The integration work between Alert and MDE itself will depend on how these customers wish the vendors to proceed. “We are starting with a fairly light integration,” he explains, “and, as we bring the two services into a single environment, the focus will be on the technology being in place to allow Alert customers who want to post documents to be able to do so without having to re-input data.”
The initial implementation phase will therefore focus on ensuring the data flow between the two solutions is uninterrupted. Omgeo Alert clients will therefore be able to access MDE through a tab on their Alert interface. When updating their Alert settlement instructions and reference data, users will be encouraged to upload associated documents to MDE.
Over the next two to five years, the vendors will ask their clients about any further technological integrations that they may wish to see put in place around the combined offering, he adds. This fits in with Omgeo’s plans for Alert, as it gradually extends its reach into other areas of reference data beyond SSIs, such as entity data. “A big strategic area for us has been data validation and we want to provide not only validated settlement instruction data, but also documents. The market is much more concerned post-crisis about the quality of reference data and the accessibility of that data in a timely way,” contends Burchenal.
Back in January last year, Reference Data Review spoke to Mark Bouchea, director of SSI product management, about the vendor’s plans to develop Alert in terms of adding legal entity data into the mix, as well as improving regional support and data security. To this end, Alert appears to be developing into more and more of a reference data led product. As noted by Bouchea last year: “We are being increasingly asked to build out ancillary reference data services onto Alert, for instance we are looking to launch a legal entity solution by the first quarter of 2011. Clients are under a degree of duress to make sure they know the exact entity data of their counterparty at any given time. Within Alert that is not entirely clear at the moment – they don’t truly know the entity their counterparty rolls up into.”
Given the regulatory and industry focus on legal entity data in the market (see the discussions around reference data utilities in the US and Europe for proof), this extension into other reference data areas is logical. Burchenal also points to the impact of the moves in Europe towards T+2 settlement as a driver for this: “Firms are going to have to change their processes in some way to be more efficient in order to meet those timeframes, especially when you are talking about setting up accounts and being able to access SSI and account settlement data on a point of sale basis.”
In the past, this process has been non-standard and manual, with faxes and emails dominating the client documentation scene. However, in today’s more time conscious environment, speed of delivery and standardisation have become much more important in order to ensure the transmission of accurate and reliable data to multiple counterparties and clients.
Going forward, Burchenal indicates that Omgeo will continue to look for best of breed providers to extend Alert’s reach in certain markets, but it will also look to develop its own in-house functionality.