omgeo update

A DTCC Thomson Reuters Company

Omgeo Update2008 BDUG Conference

Kevin Arthur, Director, Fixed Income Markets

A DTCC Thomson Reuters Company2 BDUG Conference, September 15, 2008 Scottsdale Arizona

Agenda

1) Omgeo Introduction

2) Current Environment / Trends

3) Omgeo’s Business Focus

4) Review of Omgeo products- ALERT, Central Trade Manager (CTM), OASYS, TradeSuite

5) Municipal Securities• Low affirmation rate and the industry challenge

• Question: What do Custodians see as impediments to affirmation of the ID Confirm?


About Omgeo

Omgeo is the global standard for efficiency, certainty and confidence in post-trade, pre-settlement operations.

We create certainty in post-trade operations through providing automation for timely allocation, matching, confirmation and affirmation of the economic details of trades between investment managers, hedge funds, broker/dealers, and custodian banks.

Our established, global community includes:

• 6,000 community members

• 46 countries

• 80 firms in partnership network


An established track record

• Industry participation- Jointly owned by DTCC & Thomson Reuters

- Board of Managers, Advisory Board, Working Parties (50+ firms represented)

• Regulatory & depository relationships• Handling over 2.0 million transactions per day

- Will exceed 3 million fixed income allocations in 2008

• Managing over 2.2 million settlement instructions on over 330,000 accounts

Omgeo Local Offices

Boston

Chicago

Frankfurt

Glasgow

Hong Kong

London

Manila

New York

Paris

San Francisco

Singapore

Seoul

Stockholm

Sydney

Tokyo

Toronto


Pre-Trade

IM-D

ecis

ion

of T

rade

IM/B

D N

egot

iatio

n

Trade

Tra

de O

rder

Tra

de E

xecu

tion

Post-Trade, Pre-Settlement

Tra

de A

lloca

tion

Tra

de C

onfir

mat

ion

Mat

chin

g

Tra

de A

ffirm

atio

n

Set

tlem

ent E

nric

hmen

t

3rd P

arty

Not

ifica

tion

Settlement

Net

ting/

Cle

arin

g

Set

tlem

ent o

f S

ecur

ities

/Cas

h

Rec

onci

liatio

n

Dep

osito

ry

Cus

tody

Omgeo

Omgeo:Where do we fit in the trade process?

IM-D

ecis

ion

of T

rade

IM/B

D N

egot

iatio

n

Pre-Trade

Operational Performance Measurement


Current Environment / Market Trends

• CDO and Sub-Prime Challenges • FNMA/FHLMC• Municipal Securities

• Auction Rate Securities, Concerns about Municipalities, Increased topic on Capitol Hill,

Low affirmations rates

• Mergers• BNY/Mellon, State Street/ ITG, JPMC/Bear Stearns, BOA/Countrywide, RBS /ABN

• Changes in liquidity sources• NYSE Euronext, NASDAQ/AMEX, Turquoise, Dark pools, Proliferation of execution

management (EMS) platforms, BATS

• Retail SMA/Wrap/Wealth Mgmt• Shift in assets from traditional 401k to SMA/UMA

• Outsourcing• Retail SMA, Institutional, Hedge Funds

• Fixed Income automation slowly catching up to Equities


Current Environment / Market Trends

• Brazil, Russia, India, China (BRIC)• Emerging markets, Building out financial services infrastructure, US firms moving to

emerging markets• Concerns about Derivative automation (Fed)

• OTC, trade processing and confirmation• Regulatory pressure

• OFAC, SOX, FINRA, SEC, increased Corporate Information Security• Heightened focus on Operational Risk

• STP and risk management key focus areas

• U.S. on a green path• Stop the paper…DTCC and Omgeo campaigns

• Customers are looking for full automation of their trading book• Desire increased transparency, reporting and compliance on a global basis


Industry Challenge

• What do we need to do as an industry become more efficient?

• How do we deliver progress in today’s environment?

• What are ways to add client value in the trade processing chain?

• How do you differentiate your service offering in the current environment?


Omgeo Business Focus

Committed to delivering robust and sustainable solutions for our global community of clients.

• Continue to connect all market players including buy side, hedge funds, brokers, prime brokers and custodians into trade processing model for domestic and global trading activity

• Automate trade processing from front office straight through to settlement facilities

- Enable seamless interfaces to Omgeo from trading systems and OMS- Electronic interface from Omgeo to Depositories

• US DTCC, Canada’s CDS, Japan’s JASDEC, Brazil’s CBLC

• US Market - Enhancements to the electronic ID Confirm with Trade Suite ID 7.1

• Automate and eliminate paper confirms- OASYS allocation processing

• Continue to expand Fixed Income community


Omgeo Business Focus Areas

• SSI- Support broad array of asset classes, allow for ease of access to data, ensure

market practices are followed, validate as many data elements as possible to ensure accurate population

• Deliver increased asset class coverage:

- Fixed Income • Repo • TBA

- Derivatives• Exchange Traded Derivatives (Futures, Options, Contracts for Difference)• Derivative Reconciliation• Collateral Management

- Foreign Exchange (FX)

• New markets: - Canada, Brazil, India, China


ALERT

• Enhancements – Custodian View - FX SSI – Delivered in Q3 2008

- United States Treasury Office of Foreign Asset Control (OFAC) Compliance – Q4 2008

• ALERT will prohibit future use of OFAC sanctioned countries in the definition of settlement instructions

- New Markets/Validations Release – Q1 2009• Expanded coverage of instruments, depositories and market rules

• Tighter controls on existing instructions to increase data quality

- UI Upgrade: Settlement Instruction (SI) View – Q2 2009• Improved SI UI page layout to help data quality and client understanding of

the settlement chain

- Expanded Audit Reporting – Q3 2009• Enhanced audit capabilities & more granular detail into IM activity when

linking to custodian models

- SI Market Rules Scan – Q4 2009• Assess compliance of custodian models


Omgeo CTM

• Recent delivered enhancements- Third party notification

• Allows up to 15 3rd parties to receive SWIFT and CSV files

- CTM Broker

• Allows broker dealers to come onto CTM

• Usage

- July 07: 851,812 allocations

- July 08: 1,650,295 allocations

- July 07: 100,597 SN messages

- July 08: 141,800 SN messages

- 350 clients on CTM globally as of August 08 (49% increase YOY)

94% increase YOY; 399% increase since July 06

41% increase YOY


OASYS

• Recent enhancements- OASYS 5.2 – Delivered to production

• Enhanced Fixed Income, TBA; Enhanced Repo functionality

- OASYS 6.0 – Targeted delivery Q2 2009• Enhanced Fixed Income, Enhanced commissions management, BIC

codes for Clearing Broker, Upgraded API's (Linux), Pre-note allocation to Custodian via TradeHub

• Usage

- Daily equity average: 180,000 allocations

- Daily fixed income average: 15,000 allocations


TradeSuite – ID Confirm

• Enhancements- TradeSuite 7.0 – ID Net, New Free Format Fields, Reg SHO; Enhanced

Repo functionality- TradeSuite 7.1 – Elimination of paper confirms

• Usage

- Average daily trades/confirms: 1,510,527

- Daily equity average: 1,403,866 - Daily fixed income average: 106,661

- Confirm/Affirm (TradeSuite): 1,389,302 - Central matching Daily Average 121,225


Summary of Key TradeSuite Projects

• Paper Elimination - TradeSuite Confirm Backer/Disclosure - Bond Market Association (SIFMA) – Task Force on Electronic Confirms

• Subsequent interest expressed by equity markets

- TradeSuite Confirm Gap Analysis with Rule 10B-10: add indicative fields, expand special instructions and enrich confirm from database of “housed disclosures”

- Omgeo met with SEC and MSRB staff on November 1, 2007 regarding exemptive relief letter

• SEC approval gained with No Action Letter on March 12,2008• Access of disclosure URL equals delivery• Target rollout by Q4, 2008• Continue to educate community – Ongoing

• TradeSuite Repo

- Automation of trade confirmation messages for repo transactions

- Types to be supported: Tri-Party, DVP/RVP and Buy/Sell Backs

- Delivered on February 23, 2008


Summary of Key TradeSuite Projects

• ID Net- Working closely with DTCC to net institutional trades to streamline processing of

growing equity trade volumes

• SWIFT 2008- Support all mandatory changes dictated by SWIFT

• QC on the Web- Paper based reports will now be generated on line

• Regulation SHO Phase 2- For prime broker/ hedge fund enhanced processing- Phase 2: added 4 new reject reason codes specific to PB transactions to the

Advice of Cancel Correction (AOCC)


Municipal Affirmation Rate - Industry Challenge

Overview• Muni affirmation rates at only 66% vs. 89% on noon of T+2• SIFMA dealers and Muni Operations Group concerned with low affirmation• MSRB requires affirmation, else dealer required to stop trading with client• SIFMA and Omgeo investigating reasons for low affirmation• Not all buy side firms affirm trades and often delegated to custodian / clearing

agent• SIFMA working with dealer community • SIFMA and Omgeo engaging buy side firms

Next Steps• Engage custodians at BDUG – Identify possible obstacles to affirmation

- Breakout session delves into affirmation rates and barriers

• Omgeo / SIFMA to set up discussion meeting with all groups, dealers, buy side and custodians


Muni vs. Non-Muni Affirmation Rates

Non-Muni Trades Muni Trades

Affirmed trades on T+2, Noon 89% 66%

Un-affirmed trades on T+2, Noon 11% 34%

U.S. trade affirmation rates for July 2008


Lagging Muni Affirmation Rates

What are some of the causes for low affirmation rates?

Please take a moment to share your thoughts on why affirmation rates are so low and detail any roadblock or impediment

A DTCC Thomson Reuters Company

omgeo update

Documents

posttrade operations

trade processing chain

central trade manager

todays environment

omgeo campaignscustomers

global community

presettlement operations

derivative automation