Can Data Grids Deliver STP for Canadian Banks

and Asset Managers?

Case Study

Who is Hyla Anyway?Who is Hyla Anyway? What Problem are we trying to solve?What Problem are we trying to solve? What is our solution STPGrid?What is our solution STPGrid? What did we learn from the pilots and What did we learn from the pilots and

early deployment? early deployment?

AgendaAgenda

Founded 2002 in OttawaFounded 2002 in Ottawa Veteran management team, venture-fundedVeteran management team, venture-funded Two years of product design/developmentTwo years of product design/development STPGrid Pilots in 2Q 04STPGrid Pilots in 2Q 04

Mission: deliver faster,

cheaper,better IT solutions Using 21st-centuryarchitectures

Who is Hyla?Who is Hyla?

Hyla IS an award-winning enterprise software product team that takes on the BIG problems.

Our RESEARCH shows that the only growth market for software is SMEs, BUT selling/servicing SMEs is suicidal with existing software models and platforms..

SO in 02-04 we built “Hylamatrix”, an advanced autonomic software platform tailored for SMEs.

NOW in 04-08 we can deploy network-based business process solutions to SMEs with minimal development and support cost.

Hyla MissionHyla Mission

““Even a Even a free software productfree software product is not guaranteed to is not guaranteed to sell to second and third-tier investment firms, many of sell to second and third-tier investment firms, many of which are happy with faxing and phoning and are which are happy with faxing and phoning and are averse to change.”averse to change.”

Source:Source: Canadian Securities AdministratorsCanadian Securities AdministratorsSTP Readiness Assessment, Sept 2003STP Readiness Assessment, Sept 2003

““The overall level of preparedness for implementing The overall level of preparedness for implementing STP and the of commitment towards STP and the of commitment towards institutionalizing STP by 2005 appears low.”institutionalizing STP by 2005 appears low.”

Problem: STP is StalledProblem: STP is Stalled

Barriers to STPBarriers to STP

InertiaInertia We’re waiting to see what the industry as a We’re waiting to see what the industry as a

whole does in 2005”whole does in 2005” ComplexityComplexity

““Our IT department is on maternity leave”Our IT department is on maternity leave” CostCost

““We’ve never paid for communications We’ve never paid for communications before – why should we start now?”before – why should we start now?”

InvestmentManagers

Brokers

Custodial LandscapeCustodial Landscape

20+ large global custodian banks

8,000 N. American IMs (90% US)

most of IMs are small/midsized

The cost of improving the process is greater than the The cost of improving the process is greater than the benefits.. benefits..

a new solution and business model is needed!a new solution and business model is needed!

STP Investment for 2002,2003 and 2004Percent who have or anticipate NO

INVESTMENT (STP Readiness Survey)

Paralyzing MisconceptionParalyzing Misconception

Make it Make it simple and cheapsimple and cheap for IMs for IMs No SoftwareNo Software

No installation, no consultants, no training No intermediaryNo intermediary

peer to peer: direct connection between IM and custodian

Reasonable investmentReasonable investment spread costs fairly between custodians and IMs on a

‘pay-as-you-go’ basis

Priority: IM AcceptancePriority: IM Acceptance

1.1. We build smart, autonomous We build smart, autonomous agentsagents to perform all to perform all core functions of enterprise softwarecore functions of enterprise software

““Middleware is obsolete if there is no Middleware is obsolete if there is no middlemiddle””

3.3. We break down existing IT business models and create We break down existing IT business models and create new ones based on a new ones based on a performance-pricingperformance-pricing model model “We get paid “We get paid afterafter we deliver value” we deliver value”

2. We deploy these agents broadly over the Internet, 2. We deploy these agents broadly over the Internet, embed them invisibly into the user’s desktop and embed them invisibly into the user’s desktop and maintain them remotely maintain them remotely “IT is a utility like hydro”“IT is a utility like hydro”

Our Radical VisionOur Radical Vision

Investment Managers

Importtrade report

Structure asISO20022

XML

Enrichdata

Export tocustodian

format

PMS/TOMS allowIMs to create a TradeReport and save it asa text file. Or just use

Excel.

XML and ISO20022is our interrnal

format

Our AI engine allowsus to do intelligent

data transformation

Different custodians acceptdifferent text message

formats - STPGrid supportsthem all.

IM views &approves

report

IM is shown the finalreport for approval

using InternetExplorer

Upload tocustodian

IM logs into custodian webportal and uploads file

Business ProcessBusiness Process

Patent-pending grid/autonomic framework Supports a set of compact, invisible IT services

• Pre-built library of core business services Requires only Windows XP (.Net) Self-installing, self-updating over Internet

“[Hyla] has created a multi-faceted software platform capable of translating many forms of information into a common format. It sounds esoteric but the platform is proving to be of immense practical value to [customers].” Ottawa Citizen, 9/30/04

HylamatrixHylamatrix Platform Platform

consistency with industry standards consistency with industry standards (reduced embarrassment) (reduced embarrassment)

cost reduction (reduced fees)cost reduction (reduced fees) risk reduction (reduced errors)risk reduction (reduced errors)

IM BenefitsIM Benefits

IM Signup ProcessIM Signup Process

1.1. Talk with Hyla via Talk with Hyla via phone & emailphone & email

2.2. Sign connection agreement (2 pages)Sign connection agreement (2 pages)

3.3. Send sample trade filesSend sample trade files

4.4. Install software on your Windows PCInstall software on your Windows PC

5.5. Answer questions (maybe tidy trades)Answer questions (maybe tidy trades)

6.6. Provide add. trades for testingProvide add. trades for testing

7.7. Test and go-live with custodianTest and go-live with custodian

1.1. Extends STP to Extends STP to small IMssmall IMs cost-effectively cost-effectively

2.2. Offers Offers competitive alternative to FMCNetcompetitive alternative to FMCNet for for mid-sized IMsmid-sized IMs

3.3. Allows custodian IT staff to design and deploy Allows custodian IT staff to design and deploy new customer servicesnew customer services easily easily

4.4. Provides Provides immediate complianceimmediate compliance with ISO15022, with ISO15022, XML, and CCMA “Best Practices” XML, and CCMA “Best Practices”

5.5. Supports Supports proprietary custodian interface formatsproprietary custodian interface formats (higher-quality reporting)(higher-quality reporting)

Custodian BenefitsCustodian Benefits

STPGrid Pilot 2Q 04STPGrid Pilot 2Q 043 IMs, 1 custodian 3 IMs, 1 custodian To provide a uniform environment for the pilots, To provide a uniform environment for the pilots,

Hyla installed STPGrid on a generic sub-$1000 office Hyla installed STPGrid on a generic sub-$1000 office PC, running Windows XP. PC, running Windows XP.

Each investment manager then provided Hyla via Each investment manager then provided Hyla via email a recent trade report file. email a recent trade report file.

Some of these files were ‘exports’ from complex Some of these files were ‘exports’ from complex Portfolio Management Systems (PMS), while others Portfolio Management Systems (PMS), while others were hand-built Excel spreadsheets. (Based on the were hand-built Excel spreadsheets. (Based on the pilot users, Excel is definitely the industry’s most pilot users, Excel is definitely the industry’s most popular PMS.) popular PMS.)

Hyla staff then wrote rules files (configuration files) Hyla staff then wrote rules files (configuration files) which ‘taught’ STPGrid how to parse the investment which ‘taught’ STPGrid how to parse the investment manager’s trade report. manager’s trade report.

STPGrid as “Middleware”STPGrid as “Middleware”

Purified Trade DataPurified Trade Data

Neutral Format based on CCMA Best Practices (Dec 03) SWIFT SMPG ISITC ISO20022 XML

Pilot FeedbackPilot Feedback

"With my many other duties, it’s really a joy to send "With my many other duties, it’s really a joy to send trades to our custodian using STPGrid. It’s simply trades to our custodian using STPGrid. It’s simply ‘drag and drop’. That’s all there is to it!" ‘drag and drop’. That’s all there is to it!"

Rita Tiltina,  Rogan Investment ManagementRita Tiltina,  Rogan Investment Management

"STPGrid's approach of using light weight software "STPGrid's approach of using light weight software agents to manipulate and transport information agents to manipulate and transport information over the internet provides an ideal solution for our over the internet provides an ideal solution for our STP strategy.STP strategy."  " 

Bill Chow, YMG Capital Management Bill Chow, YMG Capital Management

STPGrid StatusSTPGrid Status

Engaged 12+ custodian banks, mostly U.S. “You guys are the only ones that can reach the

mass of my IMs” 4 actively promoting STPGrid to IMs

Interviewed 300+ investment managers 25% - 40% of IM firms using manual processes FMCNet big player in Canada (50%) U.S. more fragmented (Omgeo, Swiftnet, DTC)

Comparing STP Solutions

-$100,000

-$50,000

$0

$50,000

$100,000

$150,000

250 1,000 2,500 4,000

Manual Trades per Year

Net

3-Y

ear

Sav

ing

s

STPGrid FMCNet Omgeo

STPGrid EconomicsSTPGrid Economics

After improving STP rates for settlement After improving STP rates for settlement New services will includeNew services will include

Automated ReconciliationAutomated Reconciliation Broker CommunicationsBroker Communications Corporate ActionsCorporate Actions

Beyond SettlementBeyond Settlement

Questions?