Last year, post-trade services vendor Omgeo added a trio of new hires to focus on bolstering its data related business solutions, including its web-based global database for the maintenance and communication of standing settlement and account instructions (SSIs), Omgeo Alert. Over the course of this year, the vendor will be taking advantage of this hired expertise to develop Alert in terms of improving regional support and data security, as well as adding legal entity data into the mix, explains Mark Bouchea, director of SSI product management.
“Over the last two years there has been a dramatic shift in the usage and features of Alert in terms of communication methods and data inputs,” says Bouchea. “We have invested very heavily in tools that facilitate the communication with Alert, as well as the rules that govern instruction updates, which enforce data quality.”
This year will involve more of the same type of investment, focused on three specific areas: data quality, data security and technology. “We have to ensure that for any market where a standard is defined, the corresponding rules to meet this standard are incorporated into Alert. With this in place, a counterparty will know that information they retrieve from Alert will contain every field that is required to settle in that market and is provided in the format dictated by that market standard,” he elaborates.
Security has become a particular area of concern for Omgeo’s clients and the financial services community at large; one need only look at the news coverage of internet hacking and data breaches to understand why. The vendor is therefore working to ensure that all of the information that is communicated through Alert is handled with the highest possible level of security, says Bouchea. “That can be their own tools to enforce security or the technology that we use to support them. The largest volume of clients interfacing with Alert use a machine to machine connection so technology is a very important part of this. We need to make sure we are using the latest, most compliant and secure technology,” he continues.
Data quality is also high on the agenda for 2010. To this end, towards the end of last year the vendor released an upgraded version of its Alert Direct application programming interface (API) for its largest volume clients: broker-dealers. “Most are leveraging an Alert Direct interface primarily and the web interface as a backup. We are in the process of migrating our clients to the new version so they can take advantage of the enhancements to data quality,” says Bouchea.
The process to improve data quality is ongoing, he adds: “Data quality remains first and foremost on our minds because markets are continuing to evolve quickly and the level of granularity of data that we support needs to be constantly updated. We need to make sure every instruction that is entered into Alert is absolutely compliant with the current standards.”
Last year the vendor also launched its new markets and validations release, which essentially aims to ensure that Alert is governed by the most compliant possible rules engine. It is compliant with Securities and Market Practice Group (SMPG) standards, but it also enforces rules above and beyond those standards. “We were able to design these rules by consulting a global client forum in specific spaces such as FX, where there was no standard defined. We brought the key players together from around the globe to define that FX standard,” he elaborates
Furthermore, account number capture is a very big issue for clients that trade across all security types, so Omgeo got agreement in a similar client forum setup on the most important account numbers to capture for each SI update. “We therefore added a mandatory field in the system for that data, which seems simple but took a number of forums to bring the buy side, the sell side and the custodians together to agree the mandatory rule in Alert,” adds Bouchea.
He expects this type of activity to continue throughout this year: “We are looking to move into areas like collateral management, more derivatives instruments, fixed income and more settlement methods will be supported.”
As noted by A-Team Group back in April last year, the hiring of industry practitioners to lend a level of industry insight to the vendor’s data endeavours has paid off. Bill Meenaghan who joined from State Street as a product manager has been focused on the workflow and tool suite needed for the global custodian and investment manager side of Omgeo’s business. “He has a very good grasp due to his previous experience of the relationship between a custodian and an investment manager and that is an integral space for our future,” adds Bouchea.
Janet Coughlan joined from UBS and was put in charge of strategic initiatives for Omgeo Alert. “She has a long history on the sell side, especially in the broker-dealer circles in Europe. She is helping to spearhead the local market analyses to help broker-dealers benefit from data quality improvements,” he explains. “In her analysis she found that the highest priority areas for fails (by measure of cost of fails) were in France, Spain and the Netherlands, so we went back to the leading holders of instructions in those markets and pushed through a standardisation effort. This was so that clients can retrieve much more compliant instructions than before. If there are fails now, it is less likely to be attributable to incorrectly formatted settlement instructions in Alert.”
The next six months will be a period intense activity for these executives, as the vendor has a number of concurrent work streams ongoing at the moment. One is to expand some support for regional or local changes of rules, such as a German tax rules. The vendor will also be supporting CLS for FX instructions, as it is something that the large FX dealers have been waiting for, according to Bouchea.
“We have identified new functionality to support custodians better in entering their settlement model details to Alert,” he continues. “We have had some very good discussions with them about providing Alert with their network details around the globe. This would also cover some of the more complex scenarios such as markets where they have multiple different agents and we need to make it clear which ones they are going to activate.”
The vendor is also looking at the functionality required to communicate changes between a custodian and an asset manager to take advantage of that change. For example, if a custodian knows it is changing its agent in the future, it can make that change now to notify the asset manager ahead of time.
“We continue to work on data security and the buy side and sell side want greater levels of auditing in Alert. We are spending a lot of time and investment in capturing the right level of data in Alert and getting end to end transparency for the user,” Bouchea explains. “We will be able to provide an asset manager with all the changes that have been made to their instruction, for example. It is a very important stream of information for an asset manager to know and it will also be made available on the broker side.”
Over the last year Omgeo has seen an increasing number of claims issued, where there is a dispute about the details of an instruction, he says. The vendor is required to go back and look at the historical state of the instruction on an earlier date of settlement and settle that dispute – how it was structured and altered and who received the update. Risk and compliance have therefore continued to be buzzwords that Omgeo’s clients are keen to hear more about.
“We are working on compliance scan functionality to help clients understand their global compliance to different market rules. Large asset managers have hundreds or thousands of instructions in the system and they are required to know that all of these are compliant to the current standards. We are working on functionality now that will deliver a summary report to the user telling them the details of the total number of instructions that are, and are not, compliant. They will be able to then drill down into the individual instructions to see whether there is a recurring theme in a particular market and we will allow them to bulk edit these instructions – they can more quickly make a change to all these instructions in four or five clicks – this is an increasingly important area as there is a risk element to having incorrect instructions in the system. They want to be able to resolve that before they have a fail,” he explains.
Omgeo certainly has a lot on its plate at the moment and the level of client demand for certain new functions means it has been forced to re-evaluate its deliverables for 2010. “The custodian release to allow them to populate their own fields is a priority at the moment due to client demand, so we are reorganising our overall delivery dates for the year,” he says. “We will be republishing our schedule for the year at the beginning of March.”
In the long term, Alert appears to be developing into more and more of a reference data led product, notes Bouchea. “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,” he explains.
Omgeo is currently looking at third party sources for this data and will sort this entity information so that every counterparty in Alert is mapped to their legal entity data. “When clients pull down their counterparty instructions they will be able to see the full details of the entity. Currently a lot of the large dealers have manual staff that is tasked with carrying out these checks by buying the data direct from a vendor or sourcing and storing the data themselves and then mapping the data to the funds and underlying instructions,” says Bouchea.
The vendor is aiming to alleviate some of the cost and time associated with client information that is funnelled through Alert. Clients will therefore need to certify which legal entity is attached to their instructions and automatic updates will be done in Alert and communicated to counterparties if that entity data changes.
“We are working with a vendor that we have selected to partner with us and our clients to make sure that we map that data appropriately. We will begin the operational mapping exercise with our clients soon and at that point will reveal the name of the vendor concerned. We have a handful of clients that worked with us on our analysis phase and they are now advising us on the design phase of the project,” concludes Bouchea.
It will certainly be interesting to see which vendor has been selected as it may prove another differentiating factor for the legal entity data provider itself. Check back soon for the details…