Omgeo

Omgeo Central Trade Manager (CTM) is a new service designed to automate the post-trade confirmation process and the early stages of settlement. Omgeo LLC, the company that provides this service, is a joint venture owned equally by the Depository Trust & Clearing Corporation (DTCC) and Thomson Financial. Omgeo CTM builds upon the existing Oasys services provided by Thomson Financial. Oasys is an electronic trade confirmation (ETC) service used by Broker Dealers (BDs) and Investment Managers (IMs) to exchange trade confirmation information. Oasys has a large user base of approximately 2,000 firms around the world. Omgeo hopes to migrate its Oasys user base to the CTM service over time, and Oasys has now been rebranded "Omgeo Oasys."

Omgeo CTM is basically the Oasys service with the addition of a central matching facility. There are, of course, more facilities and functions in the new service than in Oasys, and some major differences primarily the ability of CTM to send SWIFT settlement instructions on behalf of the investment manager. However, Omgeo CTM is essentially used for the same purpose as Oasys the exchange of block and allocation trade confirmation information between broker dealers (the sell side) and investment managers (the buy side). In concept, Omgeo CTM is also similar to the GSTPA TFM service and will compete with it directly.

The participants in Omgeo CTM are broker dealers and investment managers. Custodians are not direct participants and will not be customers of Mercator GSS for Omgeo. Broker Dealers are called Executors in CTM, with Investment Managers referred to as Orderers. Securities matched in CTM are equities-based and debt-based instruments.

Matching in the Omgeo Central Trade Manager is a two-stage process and occurs at both the block level (called Trade Level in Omgeo) and the allocation level (called Trade Detail). There are 21 message types defined within the CTM process. Each message can be used by either the orderer or the executor. There are no Investment Manager-specific or Broker Dealer-specific messages. Omgeo provides a complete data dictionary of fields used in Omgeo CTM. Document Type Definitions (DTDs) for all messages are also included, as well as sample XML.

Message flow and trade state management is the same for both IMs and BDs, although this needs to be confirmed with Omgeo. Messages are based on the ISO 15022 standard and use the enhanced MT511 message protocol. Messages are expressed in XML tag-delimited syntax.

There is no restriction on the order that messages can be sent to the CTM. Either an IM or a BD can initiate the process. (Currently within Oasys there is a definite sequence of message entry a lock-step process.) Matching in the CTM occurs when enough information has been received for it to take place.

After MATCH AGREED status is reached, trades cannot be modified. Participants cannot cancel one side or the whole trade after MATCH AGREED unless both parties agree to cancel their sides. Participants (both IM and BD) can operate at the Block and Allocation or Allocation-only level. Thus, if they operate at the Allocation-only level, they just need to input Trade Detail (allocation) information. Matching still occurs at the block level, but the CTM constructs a pseudo block message(s) from information contained in the Trade Detail messages.

There are two levels of message validation synchronous and asynchronous. Synchronous validation looks at the structure of the message only. It will pass or fail, and either a Valid or an Invalid message will be returned to the participant. This is the equivalent of a SWIFT ACK or NAK. Asynchronous validation happens after synchronous validation and validates the content against the existing trade-side data. The CTM does not send a message to the participant after an error has been found at asynchronous validation level.

The only proactive messages that are sent to the participant from the CTM after synchronous-level validation are a Valid or an Invalid message. The participant must send retrieve or query messages to the CTM to obtain the status of individual or multiple trades.

The CTM generates Notification of Business Exceptions, which indicate a problem with the trade. These are time-based alerts and are generated against an Omgeo-defined table of timeouts for different business processes. Participants have to send request messages to obtain these statuses.

There are two connection methods available to the CTM the "Direct Interface," which is a real-time API-based connection running on Solaris 2.6 and NT 4.0 SP5, and the "Import/Export Adapter," which is a file-based connection method. This second method sits between the Direct Interface and the participant's systems. The Direct Interface provides authentication and encryption (40- to 128-bit) services. It uses a leased line to get to the Omgeo network and does not format messages or interpret incoming messages.

There is a mechanism called "Update Guard" that prevents a record from being updated once it has already been updated. This involves the exchange of Update Guard information between the participant and the CTM.

Matching at the CTM (at both block and allocation) occurs at two levels level 1 matches, which are mandatory field matches (quantity, trade date, security ID, etc.), and level 2 matches, which are profile driven by the Investment Manager.

It is not clear from the CTM specification how profiles are updated by the Investment Manager. Two profiles can be set up for equity-based and debt-based instruments.

There are a number of value-added services that can be optionally used with Omgeo CTM. These include Securities ID cross-referencing against Telekurs and Exshare data, SSI enrichment for either party using the Omgeo Alert service, and the automatic generation and sending of settlement instructions to the Custodian via the SWIFT network (messages supported are the 7775 MT521, MT523, and MT592 and the 15022 MT541, MT543, and MT515).

Investment Managers must be direct participants to use the CTM. However, for Broker Dealers, a bridge exists between the Oasys network and the CTM environment. Therefore, Broker Dealers who are existing users of Oasys can still continue to use Oasys to send confirmation messages to IMs who are participants in Omgeo CTM. It also means that IMs who join Omgeo CTM get access to a ready-made community of about 1,000 brokers. The initial target market for Omgeo CTM is the Investment Management community.



Next Generation Application Integration(c) From Simple Information to Web Services
Next Generation Application Integration: From Simple Information to Web Services
ISBN: 0201844567
EAN: 2147483647
Year: 2005
Pages: 220

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