Omgeo, Calypso Technology and Citi Depositary Receipt Services have breaking news at the Sibos conference this week, reflecting the diversity of services working in conjunction with the SWIFT consortium financial messaging and networking offerings.Despite the push for automation, manual processes, laden with risks and costs, still rule the settlement and account instruction (SI) phase of the trade lifecycle, according to Omgeo, the global provider of post-trade services.
A survey of eight top custodian banks conducted by Omgeo this past July reveals that regardless of a greater concern for risk management and standards, almost 10% of custodian bank clients’ trades fail or require fixes after instructing. Nearly a third—30% or more—of the failures and fixes are caused by settlement instruction (SI) issues, report 40% of the surveyed banks.
Survey respondents point to manual or missing SI data as the major problems plaguing settlement instructions; the most common manual method of sharing SI information with investment manager clients is via email.
To get around this problem, a majority of the banks surveyed, 63%, say they should be more involved in the maintenance and updating of their SI systems. The underlying implication is that the custodians are leaning more toward automation and possible middle-office outsourcing, says Omgeo, which adds that global regulators will be applying the pressure for greater efficiency and transparency across the trade lifecycle.
With efficiency and transparency in mind, the Legacy Asset Management Company (LAMCO), the asset management platform for Lehman Brothers Holdings Inc. (LBHI), embarked upon a centralized overhaul for its trading activities across multiple asset classes in rates and credit products, including complex and vanilla interest rate derivatives and credit default swaps. The firm had systems scattered across the front-, middle- and back offices for its derivatives, bank debt, real estate and commodities portfolio.
To get to centralization, the firm is using Calypso Technology’s offerings on a software as a service (SaaS) basis. The implementation will aid LAMCO’s trade and market data mapping efforts and pricing models via Calypso’s valuation and risk capabilities. The setup also stratifies the data for multiple divisions within the firm.
An integrated trading, risk and processing platform, the Calypso System provides middle-office and desk-level risk management support, and serves as the central market data repository for all third-party market data.
The Calypso implementation enables LAMCO’s team to analyze its trade population more efficiently, says Savvas Mavridis, managing director at LAMCO, in a prepared statement; LAMCO was formed as a subsidiary of LBHI.
On another SWIFT-related front, Citi has announced that its Securities and Fund Services group has delivered technology that will facilitate the standardized automation of corporate actions announcements for depositary receipts (DRs). The development effort is key for Citi’s XBRL pilot program participants.
Citi’s current project, which involves the SWIFT and XBRL US consortiums, is using the XBRL taxonomy for corporate actions reporting and is based on elements of the ISO 20022 corporate actions global standard. The initial Citi pilot was focused on preliminary and final dividend announcements for Citi’s DR programs and got underway late last year, Citi officials say.
Citi has begun work on phase two of the XBRL project and will focus on reporting non-dividend corporate actions. While based on ISO 20022, the Citi efforts are more streamlined than current reporting and announcement processes, officials say.
“Our industry has long been seeking a standardized solution to the challenge of corporate actions notification and automated processing,” says Alan Smith, managing director and head of issuer services at Citi, in a prepared statement. “Much work remains to be done, however, in engaging more participants and establishing an industry-wide governance model for these early efforts.”
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