The vendor Omgeo is known for helping brokers, custodians and fund managers to automate the process of post-trade matching. It has branched into a totally new business line, however: collateral management.
Marianne Brown, the firm’s New York-based CEO, says the collapse of Lehman Brothers in 2008 created the impetus to grow this line of work.
In the wake of that bankruptcy, in which many counterparty assets were lost, some custodian banks moved into the game of ‘prime custody’, trying to take away hedge-fund market share of prime brokers with a more robust safekeeping model.
To compete with brokers, however, custodians have needed to provide more than just that. Collateral management has become a huge business for them, driven by the regulatory crusade against OTC derivatives.
In one case, though, a custodian providing prime-like services to hedge funds is using Omgeo for the collateral piece. Brown declines to name the custodian. She says Omgeo has this year signed up roughly a dozen direct buy-side clients, all in the US, although the firm is trying to pitch this to funds in Asia, too.
The service is a software program that shows a hedge fund or long-only manager what obligations are attached to their assets, what else is available to be committed, and a valuation function.