Omgeo and the GSTPA Enter Critical Phase

The GSTPA and Omgeo continue to move forward in a tough economic climate.

Despite a tough global economy and the Securities Industry Association's recent shelving of T+1, the Global Straight Through Processing Association and Omgeo are forging ahead in their efforts to provide trade-matching services.

The GSTPA and Omgeo are focused on offering the financial-services industry post-trade, pre-settlement information-matching services which would ensure agreement on institutional-trade details among investment managers, broker/dealers and global custodians.

The GSTPA planned to launch its services on Sept. 9, at which time it was to go live with approximately 25 firms from its pilot program. The venture, however, still has not been granted exemption from registering as a clearing agency in the United States by the Securities and Exchange Commission and therefore will not be able to settle domestic trades. The GSTPA application has, in fact, yet to even go out for comment, leaving the utility severely handicapped when it comes to wooing U.S. shops.

"For cross-border players (not having the SEC exemption) doesn't concern me," says Jurgen Marziniak, chief executive officer, GSTP AG, "but it would be more helpful if we could open all doors for all U.S. players."

Omgeo, which was granted its exemption last year, recently announced it had completed the first live trades on its Central Trade Manager platform with Royal London Asset Management, a $37.1 billion investment manager. Royal London hooked into the CTM API and connected with its brokers, which are active on Oasys Global, through bridges Omgeo built, says Adam Bryan, Omgeo president and chief executive officer.

"The significant thing is bringing over the investment managers," says Bryan. "Our business decision is to get the investment managers on CTM so they have access to their brokers through the Oasys bridge and then the brokers can come on."

In fact, it is clear that both ventures see the key to their success lays in the hands of investment mangers which will, ultimately, decide where to flow their trades and thus which utility will thrive.

"The thing I want is to have the investment mangers talking to us. Not just keeping an eye on us but talking to us and really seeing what we do and what we have done," says Marziniak.

He says that the relative quiet surrounding the GSTPA (the last press release posted on gstpa.org is dated Dec. 12, 2001) is because the company is focusing on its launch date when it will really have something to say. "I think it's important for people to understand that it's not about making noise," says Marziniak. "The important thing for people to realize is that we keep our promises."

Since it severed its ties with the Axion4 consortium, comprised of SIS Segaintersettle AG, SWIFT and TKS-Teknosoft SA / Tata Consultancy Services, the GSTPA has had to carry out many functions, such as technical support, sales, marketing and relationship management, on its own. Currently, the utility has a staff of eight to 10, says Marziniak, but that could grow to around 25. The staff would mostly be comprised of relationship mangers and customer-support personnel focused on maintaining the GSTPA's relationships with its concentrators. In the GSTPA model, concentrators will be the lifeblood of its business.

That lifeblood, however, could be squeezed from both ventures if the economy continues to worsen.

"I suspect if the economy continues to be difficult that it will take a little longer than we expect (to port all clients to CTM)," says Bryan. "That means it will not be in the next 12 to 24 months."

Marziniak agrees that the economy is talking a toll on business. "I think, in a bull market, it would be much easier to get the high transaction volumes we want."

A major industry concern when it comes to matching utilities has always been interoperability - the ability to pass trades from one utility to another. A few points of agreement have been reached in that area after months of private talks. For example, it has been agreed that the investment manager's VMU will perform a cross-VMU match.

John Panchery, vice president and managing director of systems and technology for the SIA, says that a large hurdle to interoperability was bested when Omgeo and the GSTPA agreed to build their matching engines in line with the SIA's Institutional Transaction Processing Committee model. "I was concerned prior to finalizing the ITPC model but having them agree with it was a tremendous milestone."