Omgeo Update

1
Omgeo Update

• 2008 BDUG Conference

• Kevin Arthur, Director, Fixed Income Markets

2
Agenda

• Omgeo Introduction
• Current Environment / Trends
• Omgeos Business Focus
• Review of Omgeo products
• - ALERT, Central Trade Manager (CTM), OASYS,
  TradeSuite
• Municipal Securities
• Low affirmation rate and the industry challenge
• Question What do Custodians see as impediments
  to affirmation of the ID Confirm?

3
About Omgeo

• Omgeo is the global standard for efficiency,
  certainty and confidence in post-trade,
  pre-settlement operations.
• We create certainty in post-trade operations
  through providing automation for timely
  allocation, matching, confirmation and
  affirmation of the economic details of trades
  between investment managers, hedge funds,
  broker/dealers, and custodian banks.
• Our established, global community includes
• 6,000 community members
• 46 countries
• 80 firms in partnership network

4
An established track record
Omgeo Local Offices Boston Chicago
Frankfurt Glasgow Hong Kong London Manila New
York Paris San Francisco Singapore Seoul Stockholm
Sydney Tokyo Toronto

• Industry participation
• Jointly owned by DTCC Thomson Reuters
• Board of Managers, Advisory Board, Working
  Parties (50 firms represented)
• Regulatory depository relationships
• Handling over 2.0 million transactions per day
• Will exceed 3 million fixed income allocations
  in 2008
• Managing over 2.2 million settlement instructions
  on over 330,000 accounts

5
OmgeoWhere do we fit in the trade process?
Omgeo
Post-Trade, Pre-Settlement
Pre-Trade
Trade
Settlement
Pre-Trade
Trade Allocation
Trade Confirmation
Matching
Trade Affirmation
Settlement Enrichment
3rd Party Notification
IM-Decision of Trade
IM/BD Negotiation
Trade Order
Trade Execution
Netting/Clearing
Settlement of Securities/Cash
Reconciliation
Depository
IM-Decision of Trade
IM/BD Negotiation
Custody
Operational Performance Measurement
6
Current Environment / Market Trends

• CDO and Sub-Prime Challenges
• FNMA/FHLMC
• Municipal Securities
• Auction Rate Securities, Concerns about
  Municipalities, Increased topic on Capitol Hill,
  Low affirmations rates
• Mergers
• BNY/Mellon, State Street/ ITG, JPMC/Bear Stearns,
  BOA/Countrywide, RBS /ABN
• Changes in liquidity sources
• NYSE Euronext, NASDAQ/AMEX, Turquoise, Dark
  pools, Proliferation of execution management
  (EMS) platforms, BATS
• Retail SMA/Wrap/Wealth Mgmt
• Shift in assets from traditional 401k to SMA/UMA
• Outsourcing
• Retail SMA, Institutional, Hedge Funds
• Fixed Income automation slowly catching up to
  Equities

7
Current Environment / Market Trends

• Brazil, Russia, India, China (BRIC)
• Emerging markets, Building out financial services
  infrastructure, US firms moving to emerging
  markets
• Concerns about Derivative automation (Fed)
• OTC, trade processing and confirmation
• Regulatory pressure
• OFAC, SOX, FINRA, SEC, increased Corporate
  Information Security
• Heightened focus on Operational Risk
• STP and risk management key focus areas
• U.S. on a green path
• Stop the paperDTCC and Omgeo campaigns
• Customers are looking for full automation of
  their trading book
• Desire increased transparency, reporting and
  compliance on a global basis

8
Industry Challenge

• What do we need to do as an industry become more
  efficient?
• How do we deliver progress in todays
  environment?
• What are ways to add client value in the trade
  processing chain?
• How do you differentiate your service offering in
  the current environment?

9
Omgeo Business Focus

• Committed to delivering robust and sustainable
  solutions for our global community of clients.
• Continue to connect all market players including
  buy side, hedge funds, brokers, prime brokers and
  custodians into trade processing model for
  domestic and global trading activity
• Automate trade processing from front office
  straight through to settlement facilities
• Enable seamless interfaces to Omgeo from trading
  systems and OMS
• Electronic interface from Omgeo to Depositories
• US DTCC, Canadas CDS, Japans JASDEC, Brazils
  CBLC
• US Market
• Enhancements to the electronic ID Confirm with
  Trade Suite ID 7.1
• Automate and eliminate paper confirms
• OASYS allocation processing
• Continue to expand Fixed Income community

10
Omgeo Business Focus Areas

• SSI
• Support broad array of asset classes, allow for
  ease of access to data, ensure market practices
  are followed, validate as many data elements as
  possible to ensure accurate population
• Deliver increased asset class coverage
• Fixed Income
• Repo
• TBA
• Derivatives
• Exchange Traded Derivatives (Futures, Options,
  Contracts for Difference)
• Derivative Reconciliation
• Collateral Management
• Foreign Exchange (FX)
• New markets
• Canada, Brazil, India, China

11
ALERT

• Enhancements Custodian View
• FX SSI Delivered in Q3 2008
• United States Treasury Office of Foreign Asset
  Control (OFAC) Compliance Q4 2008
• ALERT will prohibit future use of OFAC sanctioned
  countries in the definition of settlement
  instructions
• New Markets/Validations Release Q1 2009
• Expanded coverage of instruments, depositories
  and market rules
• Tighter controls on existing instructions to
  increase data quality
• UI Upgrade Settlement Instruction (SI) View
  Q2 2009
• Improved SI UI page layout to help data quality
  and client understanding of the settlement
  chain
• Expanded Audit Reporting Q3 2009
• Enhanced audit capabilities more granular
  detail into IM activity when linking to custodian
  models
• SI Market Rules Scan Q4 2009
• Assess compliance of custodian models

12
Omgeo CTM

• Recent delivered enhancements
• Third party notification
• Allows up to 15 3rd parties to receive SWIFT and
  CSV files
• CTM Broker
• Allows broker dealers to come onto CTM
• Usage
• July 07 851,812 allocations
• July 08 1,650,295 allocations
• July 07 100,597 SN messages
• July 08 141,800 SN messages
• 350 clients on CTM globally as of August 08 (49
  increase YOY)

94 increase YOY 399 increase since July 06
41 increase YOY
13
OASYS

• Recent enhancements
• OASYS 5.2 Delivered to production
• Enhanced Fixed Income, TBA Enhanced Repo
  functionality
• OASYS 6.0 Targeted delivery Q2 2009
• Enhanced Fixed Income, Enhanced commissions
  management, BIC codes for Clearing Broker,
  Upgraded API's (Linux), Pre-note allocation to
  Custodian via TradeHub
• Usage
• Daily equity average 180,000 allocations
• Daily fixed income average 15,000 allocations

14
TradeSuite ID Confirm

• Enhancements
• TradeSuite 7.0 ID Net, New Free Format Fields,
  Reg SHO Enhanced Repo functionality
• TradeSuite 7.1 Elimination of paper confirms
• Usage
• Average daily trades/confirms 1,510,527
• Daily equity average 1,403,866
• Daily fixed income average 106,661
• Confirm/Affirm (TradeSuite) 1,389,302
• Central matching Daily Average 121,225

15
Summary of Key TradeSuite Projects

• Paper Elimination - TradeSuite Confirm
  Backer/Disclosure
• Bond Market Association (SIFMA) Task Force on
  Electronic Confirms
• Subsequent interest expressed by equity markets
• TradeSuite Confirm Gap Analysis with Rule 10B-10
  add indicative fields, expand special
  instructions and enrich confirm from database of
  housed disclosures
• Omgeo met with SEC and MSRB staff on November 1,
  2007 regarding exemptive relief letter
• SEC approval gained with No Action Letter on
  March 12,2008
• Access of disclosure URL equals delivery
• Target rollout by Q4, 2008
• Continue to educate community Ongoing
• TradeSuite Repo
• Automation of trade confirmation messages for
  repo transactions
• Types to be supported Tri-Party, DVP/RVP and
  Buy/Sell Backs
• Delivered on February 23, 2008

16
Summary of Key TradeSuite Projects

• ID Net
• Working closely with DTCC to net institutional
  trades to streamline processing of growing equity
  trade volumes
• SWIFT 2008
• Support all mandatory changes dictated by SWIFT
• QC on the Web
• Paper based reports will now be generated on line
• Regulation SHO Phase 2
• For prime broker/ hedge fund enhanced processing
• Phase 2 added 4 new reject reason codes
  specific to PB transactions to the Advice of
  Cancel Correction (AOCC)

17
Municipal Affirmation Rate - Industry Challenge

• Overview
• Muni affirmation rates at only 66 vs. 89 on
  noon of T2
• SIFMA dealers and Muni Operations Group concerned
  with low affirmation
• MSRB requires affirmation, else dealer required
  to stop trading with client
• SIFMA and Omgeo investigating reasons for low
  affirmation
• Not all buy side firms affirm trades and often
  delegated to custodian / clearing agent
• SIFMA working with dealer community
• SIFMA and Omgeo engaging buy side firms
• Next Steps
• Engage custodians at BDUG Identify possible
  obstacles to affirmation
• Breakout session delves into affirmation rates
  and barriers
• Omgeo / SIFMA to set up discussion meeting with
  all groups, dealers, buy side and custodians

18
Muni vs. Non-Muni Affirmation Rates
U.S. trade affirmation rates for July 2008
Non-Muni Trades Muni Trades
Affirmed trades on T2, Noon 89 66
Un-affirmed trades on T2, Noon 11 34
19
Lagging Muni Affirmation Rates

• What are some of the causes for low affirmation
  rates?
• Please take a moment to share your thoughts on
  why affirmation rates are so low and detail any
  roadblock or impediment

20
(No Transcript)