To keep up with escalating trade volumes and provide a single, easily supported platform for securities settlement, Daiwa Securities SMBC recently upgraded to CheckFree's TradeFlow interface to Omgeo's OASYS Global Direct confirmations system. Daiwa now has a messaging hub that provides a single window to all trades, which should help reduce operational risk. (Prior to that, Daiwa was using OASYS Global Workstation, a dial-up solution that could handle only limited volumes.) The TradeFlow implementation delivers data to the International Capital Market Association TRAX2 network for trade matching and regulatory reporting for bonds, derivatives and equities. Daiwa has so far automated its repo, fixed income and equities instruments and plans to extend its deployment of TradeFlow, using built-in workflow tools, to other areas of financial messaging.
Although having one dedicated interface should make life easier for settlements staff, firms often have trouble changing user software in operations — everyone's used to doing things a certain way and that way works. At Daiwa, "Users were delighted because they had a single-user view on their trade messaging and matching, they didn't have to go diving around to different systems to do that," says Robert Mitchell, project manager. That said, "they're a very dry bunch of Englishmen," says Graham Hare, deputy head of technology for Daiwa Securities SMBC Europe. "I can't hear them whooping and hollering about it."
Confirmations under the new setup take place within a few seconds and errors are low — on the day of our interview, Daiwa had sent 45,000 trades to the FSA (its regulator) and only one trade error had occurred.
Hare knows he will eventually want to modernize its SWIFT messaging infrastructure and believes TradeFlow will help. "For us, it makes a lot of sense to not try to build our own interfaces, but to buy interfaces," he says. For one thing, Daiwa's European offices have only about 90 IT people. "We look for a way to have the right infrastructure and integrate new technology in," he says.
Next, Daiwa is contemplating a major overhaul of its derivatives operations. "This is an area we'll expand dramatically in the next year or so and we're conscious that we'll need new systems and new processes," Hare says. An investigation into solutions has been budgeted for the early part of next year and implementation won't start until the second or third quarter of 2009.