Q: What is the key to your Asian strategy?
A: The joint venture has inherited 455 clients in Asia Pacific of which 200 of those are in Hong Kong. Our client base grows by 20% each year and we want to maintain this by showing asset managers and dealer/brokers that we can improve their efficiency by slicing a lot of time off the trade affirmation process. And by doing this, bring them closer to T+1.
Q: Are these clients you talk about former Thomson ESG clients?
A: Yes, in Asia the clients that the JV has inherited were Thomson ESG clients that were familiar with our ALERT and OASYS Global products. In the US, our clients are mostly former DTCC TradeSuite clients. We are now in the process of putting them together.
Q: Did DTCCs TradeSuite have a legacy in Asia?
A: No, these products were not used at all in the region. But, of course, the DTCC has some very powerful relationships in the US with global firms and we hope to be able to leverage off those to generate new business in the region. Luckily, the products offered by both companies were very complimentary, which means that it will be easy to migrate all of our clients to the new single workplace solution which we call Central Trade Manager.
Q: How can Asian asset managers and broker/dealers benefit from your service?
A: In the US now there is an 11% same-day affirmation rate and that is because there is a big lag between when a trade is done and when the information on the trade is sent to the middle or back office. This means that a lot of the affirmation is done the day following the trade. By linking the allocation process, once conducted by the OASYS product, with the trade matching capabilities of TradeSuite, the investment manager only has to input the data once, making it a much more efficient process for the broker and the custodian. This should bring the same-day affirmation rate up to 85%, which is our goal. Some of our more sophisticated clients achieve a 90% same-day rate using the current systems, so when we move them to our central trade manager this will be further improved. Obviously when T+1 comes into effect, we need to get it close to 100%.
Q: Do you control 99% of the trading activity in the US?
A: Yes, we control 99% of the settlement information and notification that goes to the DTCC for settlement.
Q: What is your penetration in Asia?
A: Our clients are all institutional clients who represent more than 80% of total trades. Since all of the biggest houses are our clients, then we have the majority of that business. Our biggest competitor in the notification business is the fax and telex.
Q: Do you have individual strategies for tackling the different markets in Asia?
A: We plan to be flexible enough to deal with the differences in each country in the region. To be sensitive to the cultures, the way that they do business and what they want to achieve. We try to position ourselves, not as an American firm, but as a global company. We are open to having discussions with the regulators, the exchanges and the depositories in each of these countries. In some countries we might need regulatory approval, and we will be seeking it.
Q: How are you going to be working with custodians in the region?
A: Our niche is post-execution and pre-settlement, but we would like to link into more depositories around the globe and be able to offer settlement directly to them. We also want to work with the middleware vendors to make sure that we can link into every order management and portfolio management system that exists while still making sure that we dont move outside of our niche. The success of T+1 means that we have to be able to work with these guys.
Q: What percentage of Omgeos business will Asia represent in five years time?
A: Thomson ESG had a business that was split evenly between US business and non-US business. Omgeo starts at 75% US business and 25% rest of the world. Our challenge is to make that 50/50. And of that 50%, Asia will represent 20%.
Q: Are there any merger and acquisition opportunities for you in Asia?
A: You never know what might come up. We havent uncovered any niche businesses operating in a particular domestic market that look interesting to us yet, but they may arise one day. We would definitely like the opportunity to talk to some regulators about helping them solve particular problems by setting up platforms for them that might carry an Omgeo white label.
Q: What about in the US?
A: There are a couple of companies that have indicated an interest in trying to play in this space. We are not sure whether they are acquisition potentials or working partners.
Q: You are referring to the GSTPA (Global Straight Through Processing Association)?
A: There has been much talk about whether we will merge. I dont see this happening. I think there will be two platforms. But I hope to work out an interoperability solution whereby a client can link to one platform and get access to the other. We have now had two discussions with the GSTPA in the past four weeks and we have another one scheduled for the end of May. This interoperability has to happen in the US.
Q: Does the GSTPA have an international strategy?
A: The company was set up to handle cross-border trading but it says that it is now going after the US domestic business. The reality is that the company doesnt yet have any clients and we dont know when it will. They seem to be changing their strategy everyday.
Q: How have clients reacted to the new Omgeo brand?
A: The brand has been adopted very quickly. We have still kept the names of Thomson and DTCC on our business cards. And we wont be renaming all of our existing products, they will become Omgeo OASYS and Omgeo TradeSuite.