After adjusting the offering to industry needs, DTCC officials say the standing settlement instruction (SSI) data repository is a de facto, centralized utility.
Post-trade infrastructure services provider DTCC has designated its recently enhanced Omgeo Alert repository for standing settlement instruction (SSI) data as a de facto “single and centralized” SSI utility.
DTCC officials timed the announcement to coincide with SIFMA’s T+2 shorter settlement conference in New York today.
The utility approach to SSI data management began about three years ago and now “delivers significant efficiency and risk reduction to a broad range of market participants,” including buy- and sell-side firms, says Bill Meenaghan, executive director of DTCC’s Omgeo Alert.
“An industry working group of the main brokers got together approximately three years ago to look at the SSI issues that they were facing,” Meenaghan tells FTF News. “They chose DTCC’s Omgeo Alert as the basis and requested several other enhancements that have since been developed and released. We also have strong connections to the custodian side and will have electronic links to custodians representing over 70 percent of the AUC [assets under custody], globally, by the end of 2017.”
By the end of last year, the SSI utility processed 6.6 million settlement instructions, which represents a 15 percent increase in traffic over 2015, according to DTCC officials. The service has helped the securities industry move toward “automating and replacing onerous, manual processes,” officials say. In addition, the Alert service processed more than 1 million foreign exchange (FX) and cash-based SSIs, which was an increase of 13.5 percent with a compliance rating of more than 99 percent, officials say.
The enhancements to Alert were necessary for it to become a utility.
“We were asked to electronically link the database to the custodian community, and released [Alert Global Custodian Direct (GC Direct)] feature in 2015,” Meenaghan tells FTF News. This step ensured that “all market rules (SMPG) were supported, which they are, plus additional market rules as agreed with the industry that fall outside of the [Securities Market Practice Group] rules,” he says.
In fact, DTCC/Omgeo expects to sign up “several more firms” for GC Direct in 2017 — “adding to Brown Brothers Harriman and J.P. Morgan, plus several prime brokers,” officials say.
Almost seven percent of the Alert database is “now being managed through the automated GC Direct process,” DTCC/Omgeo officials say. “GC Direct links the custodian’s SSI database to ALERT via ISO 20022 XML messaging and the process ensures all data is 100 percent compliant with the industry rules.”
Buy-side firms “love the idea of the custodian managing the SSI data for them,” says Joe Liguori, managing director and securities operations strategic initiatives lead at JPMorgan, in a statement. “The custodian knows the data best, so it makes sense that we manage the population of this data to the industry’s SSI Utility on their behalf. Data can then be consumed and used by their counterparties,” Liguori says.
DTCC/Omgeo is continuing to work with the industry, adding new rules when appropriate, Meenaghan says.
In addition, third-party access can be added via a real-time, application programming interface (API) “which was completed last year – this allows other market participants and vendors to link to DTCC’s Omgeo Alert and look up SSIs for trades outside of the DTCC network,” Meenaghan says.
The ability to add new features underscores the move to provide 100 percent coverage, Meenaghan says. “GC Direct and Alert for Prime Brokers helped with that, plus [Automating SSIs Together] which is detailed in today’s announcement, and support for all asset classes and markets — we added support for Collateral SSIs in 2016.”
DTCC/Omgeo officials say that they are going to expand the ASSIsT program by building upon “the more than 32 buy-side clients” that are leveraging ASSIsT by embedding Alert into the account onboarding process “by providing a solution for non-Alert investment manager counterparties.”
“As we gear up for the transition to a T+2 settlement cycle in the U.S. and the implementation of MiFID II in Europe, we would expect greater numbers of firms to delegate the automated management of SSI data and to continue to add to the more than 25,000 legal entity identifiers (LEIs) already in our database, which will lead to more efficient trade matching and lower fail rates,” Meenaghan says.
The Alert service also offers support for collateral SSIs “enabling investment managers and broker/dealers alike to create and maintain SSIs for collateral movements.”
The Alert system works in conjunction with the DTCC-Euroclear Global Collateral Ltd.’s Margin Transit Utility (MTU) — a joint venture — as well as third-party alternatives, officials add.
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