NewsMatch - SmartStream Technologies/media/Files/www/News... · The result of our strategy is clear – today our family of Transaction Lifecycle Management (TLM®) solutions stretch

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NewsMatchSmartStream Technologies’ Magazine for the Financial Services Community

www.smarts t ream-stp.com

TakeControl

INSIDE THIS ISSUE

Corona 7.0 release

Web Strategy

Focus on North America

Hedge Funds

Partnerships: Omgeo

Create your STP Control Architecture

Datamonitor declaresSmartStream leader inReconciliations &Exception Management

Outsourcing – The new Middle Office platform

Vanguard automates with TLM® Corporate Actions

Cash Managementthe big leap forward

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Welcome to NewsMatch | Message from the CEO

Over the last twelve months SmartStreamhas been relentless in its delivery of theSTP Control Architecture as we build theglobal Thought Leader focused on realtime, enterprise wide, Transaction LifecycleManagement solutions.

Execution of our strategy has left no part of the SmartStream organisationunchanged. We have realigned ourdevelopment, consulting and commercialoperations to deliver the greatest value to our customers. To exploit ourcompetitive advantage and to accelerateour product delivery we have focused on our offshore development strengths,like many of our customers. Usingintellectual capital from our productcentres and customer facing staff in eachof our regions, we leverage our Mumbailabs to fast track new applications withinthe STP Control Architecture.

SmartStream’s global footprint expands as we respond to market demand aroundthe world, building centres of excellence to service new and growing sectors.

For instance, as the Corporate Actionsmarket in Asia Pacific and Australia emergedearlier this year SmartStream expanded itsoperations in the region. We demonstratedto customers such as Vanguard Investmentsand GIC that we not only had the productfunctionality to meet their needs but thatSmartStream also has the resources tosupport successful implementations andbecome a trusted technology partner.

Evolving from application vendor tostrategic solution partnerOur growth from application vendor tobecome a strategic solution partner hasbeen made possible by several recentexecutive appointments in our globalSolutions Services business. This initiativeis creating increasingly broad based, longterm relationships, where SmartStream’sstrategic involvement ranges from solutiondesign, deployment and ultimately,knowledge transfer to the customer.

The STP Control ArchitectureThe result of our strategy is clear – todayour family of Transaction LifecycleManagement (TLM®) solutions stretchfrom Front to Back Office and cover abroader and ever increasing number of corebusiness processes. From Account Openingthrough Trade Process Management toException Management to the processing of Corporate Actions, SmartStream remains unique in our dedicated focus onproviding innovative, market leading STPapplications and services to the world’sleading financial institutions.

Practical evidence of our strategy’s successcan also be found in the adoption rate of TLM® and the emergence of the STPControl Architecture: From SmartStreamVision to Market Reality. Today, financialinstitutions in every major time zone are creating their own STP ControlArchitecture with TLM® driving theirTransaction Lifecycle Managementprocesses. UBS, JP Morgan, HVB Group,Brown Brothers Harriman, Newton AssetManagement, Commerzbank, NorwichUnion, State Street and Bear Stearns AssetManagement, to name but a few, are inproduction using TLM®.

Through their investments our customersare building scalable, flexible processes thatbring real time visibility and control tooperations. But TLM® does not force thereplacement of legacy systems, instead, itleverages their core capabilities, retiringonly those areas of weakness, whilstintegrating and supplementing existingprocessing capabilities. In so doing TLM®

empowers non-disruptive implementationsthat harness the value of existing investments.

Market dynamicsThe continued adoption of the STPControl Architecture and its TLM®

components demonstrated their strongcustomer benefits during the downturn inthe economy. This is because they offered acost effective way for financial institutionsto tackle specific areas of cost and riskwithin their operations.

2 Welcome to NewsMatchMessage from the CEO – Martin Brown

4 World NewsNews from around the groupFocus on North America

9 Hedge FundsSmartStream takes Hedge Fundsmarket by storm

10 Sibos ‘04

11 Cash ManagementThe big leap forward

12 OutsourcingThe new Middle Office platform

14 ReconciliationsA Lifecycle approach to Reconciliations and Exception Management

STP Control Architecture Control system to eliminate fragmentationand integrate disparate systems for end to end, real time control

Martin Brown – CEOSmartStream Technologies

NewsMatch 3

Midway through 2004 and the signs of asustained economic recovery are mixed.Whilst the more bullish of firms may bepreparing for growth, few are willing torelax the stringent cost control measuresthat have served them so well over the lastfew years. Any new growth opportunityneeds to be pursued with minimal outlayon new technology and with only little orno headcount increases. This environmentwill undoubtedly continue to create acompelling business case for investment incomponent-based application infrastructureslike the STP Control Architecture thatdeliver clear ROI over a short time period– in under 12 months or less.

The economy is not the only driving force behind the measured and focusedinvestments financial institutions aremaking in TLM®. For many firmsRegulation & Compliance are key businessdrivers. However, regardless of the driver,SmartStream has demonstrated a provenability to deliver focused solutions from its overall architecture to address specificprocess issues. These create manageable,measurable projects that deliver specificvalue within restricted timeframes.

The STP Control Architecture in actionOne of our customers, a leading globalinvestment bank, recently implementedthe first phase of their strategic GlobalExceptions Management platform.Developed using SmartStream’s TLM®

Process Automation (TLM® PA), thesolution provides a state-of-the-art Webbased Exception Management solution for managing trade exceptions.

The organisation now has the ability totrack trade exceptions in real time, routingfails between departments and managingescalation and prioritisation proceduresaccording to their unique business process.The move from manual to automatedprocess also provides a holistic anddynamic view of exceptions, providingmanagement with tracking and resolutionfunctionality throughout the entiretransaction lifecycle.

There is enormous value in this incrementalapproach, as customers build their ownSTP Control Architecture at their ownpace. Initial estimates for the investmentbank in this example suggest a minimum20 percent reduction in operational costswhilst creating a scalable exceptionmanagement system that will allowoperational costs to remain stable astransaction volumes grow over the nextfew years.

For our 1,100 customers, many of whomhave implemented our market leadingreconciliations products – Corona, SSR orTLM® Reconciliations – the good news isthat they already have the foundations foran STP Control Architecture in place.Reconciliations used to be seen as a finalphase in STP, ensuring consistency andcorrectness of data. But to truly manageentire transaction lifecycles, businessprocesses must cut across organisationalsilos, at times extending outside theorganisation – firms are adopting a ‘Recseverywhere’ approach to respond to this.With Reconciliations in place across theenterprise, TLM® Process Automation

(TLM® PA), SmartStream’s workflow andintegration technology, provides the pathto the rest of the STP Control Architecture.

TLM® PA provides integration andautomation not only for the businessprocesses that surround Reconciliations,such as Exception Management, but otherkey processes including Cash Management,Business Activity Monitoring and thecomplete management of Trade Processing.

With TLM® the opportunity exists today to eliminate fragmentation and disparatesystems, to realise end to end, real timecontrol of risk and operations whilstgenerating ROI at each step. SmartStreamis already working with many of theworld’s leading financial institutionshelping them to seize this opportunity.

We’re proud of the momentum that theSTP Control Architecture is making in the industry and we are committed to the continued development of our TLM®

solutions. I would urge you, if you are not already, to talk to SmartStream to seehow we can help you create your own STP Control Architecture and control thetransactions fundamental to your business.

Martin BrownCEO, SmartStream Technologies Limited

TakeControl

16 SWIFTNetAre investment Funds the last great virgin territory for STP?

18 FIX StandardisationRipples create waves in the Middle Office

20 Web StrategyBreaking down the barriers across the lifecycle

22 Corona DevelopmentsSmartStream’s best of breed solution has just got better

24 Corporate Actions Automating Corporate Actions: Mission Possible

26 Partnerships: OmgeoSTP a shared responsibility

27 Company Information


Travelex selectsSmartStream for Group standard

SmartStream has been selected asTravelex’s strategic reconciliation andexception management solution. Theselection follows Travelex’s acquisitionof My Travel’s Foreign Exchange bureaus.

Gareth Richards, Director of IT Development,for Travelex, said, “We needed a dedicatedsolution, as we were performingreconciliations using a number of in-housesystems, and it made sense to look for astandardised solution for the group.”

“One of the biggest benefits werecognised in TLM® was its scalability and ease of use. Initially our focus is CashReconciliations and Investigations, butthe uniquely generic nature of theproduct is already allowing us to exploreextending TLM® to cover confirmationmatching and cash management. Volumeinsensitivity was a crucial aspect in ourpurchase decision as SmartStream’s TLM®

solutions will be deployed to manage allof Travelex’s reconciliation requirementsglobally”, commented Richards.

Travelex was particularly impressed withthe control offered by TLM’s integratedDashBoard, which delivers real time,enterprise wide MIS and provides a fullaudit trail of all transactions from asingle screen.

Datamonitor declares SmartStream as the market leader

[

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World News

SmartStream’s TLM® solutions will be deployed to manage all of Travelex’s reconciliationrequirements globally

Datamonitor, a leading independentmarket analyst firm, reported thatSmartStream leads the EnterpriseReconciliations and ExceptionsManagement market. In their report“Enterprise Reconciliation – a sexybusiness. Moving beyond automated silos to manage extended processes”,SmartStream stands significantly ahead of the competition in terms of customernumbers and more than double thelicense revenues of its closest competitor.

Datamonitor positions the EnterpriseReconciliations market as one STP segmentthat they fully expect to experience significantgrowth. The study recognises that these systemsare delivering substantial cost savings,efficiency gains and managing operationalrisk across multiple lines of business byembracing the automation of businessprocesses. Tony Hart, Datamonitor, Senior

Analyst explains, “Because SmartStream isable to deliver enterprise wide reconciliationand exceptions management solutions that monitor the lifecycle of STP, they now offer banks a sexy, enterprise widevalue proposition.”

Martin Brown, CEO, SmartStream,commented, “Datamonitor’s marketassessment recognises, as we did when we created our STP Control Architecture,the value of managing the completetransaction lifecycle and providing bankswith a real time processing capability.We’re also delighted that they haverecognised SmartStream’s leadershipposition, both in terms of the breadth ofour solutions and our market presence.”

Download a free report from our website:www.smartstream-stp.com/datamonitor

Amer i ca • Aus t r a l i a • Aus t r i a • Bene lux •

Vanguard Investments Australia Ltd has selected SmartStream’s TLM®

Corporate Actions solution. They willdeploy all modules of TLM® CorporateActions to centrally capture and processtheir own domestic equity and fixedincome businesses. Commenting on the purchase Philip Roe, Head of IT,Vanguard Investments Australia Ltd,stated, “The use of SmartStream’sCorporate Actions is part of Vanguard’songoing commitment to adopt worldclass processes that reduce operationalcost and risk and ultimately deliverexceptional customer service.”

Vanguard’s decision to purchase TLM® Corporate Actions was based on it’s flexibility and scalability in managingthe end to end processing of corporateactions. Stefan Wawrzyniak, RegionalDirector, Asia Pacific, SmartStreamTechnologies, commented, “We aredelighted that Vanguard will bedeploying TLM® Corporate Actions to enable them to automate all aspects of their event processing from event capture and cleansingthrough entitlement calculation and their compliance and reportingrequirements.”

Vanguard reduce risk and drive customerservice with TLM® Corporate Actions

NewsMatch 5

Strategic recruitmentsupport fastdeveloping solutionsbusiness

Over recent months SmartStream has made several key appointments to strengthen its capability to meetchanging customer expectations.Clients are increasingly seeking greaterinvolvement from SmartStream,requesting longer term, trustedpartnerships that involve strategicconsulting services, solution design as well as technology deployment andultimately, knowledge transfer.

The appointments include; RichardEichen, as General Manager of USSolution Services based in New York.Simon Hoare as Principal Consultant inthe Asia Pacific region and Paul Rogers,as Senior Consultant in the company’sLondon based Middle Office & TradeProcess Management solutions business.

Each of these individuals brings a wealthof experience with them. Prior to joiningSmartStream, Eichen was ManagingDirector – Financial Services Consultingfor Vitria Technologies, where hefocussed on operations and STP business.Simon Hoare most recently held a seriesof senior positions within MorganStanley’s European and US operations,prior to which he was at an Australian based Investment Manager. Whilst Rogersbrings with him deep STP knowledge andexperience having held Product Managerand Consultant positions with FidelityBrokerage Services, Netik and mostrecently Omgeo.

SmartStream certified for Omgeo Central Trade ManagerSM

SmartStream’s TLM® solutions completed a stringent certification process to provide their 1,100 clients with the technology to take advantage of Omgeo’sinnovative Central Trade Manager service. Together Omgeo’s CTMSM andSmartStream’s TLM® provide an inclusive and comprehensive Trade ProcessManagement solution.

Lee Adams, UK Principal Consultant, SmartStream said, “Certification for Omgeo’sCTMSM solution is testament to the continued development of our STP ControlArchitecture. We believe in providing access to all key market infrastructures andservice providers, with the addition of Omgeo CTMSM, TLM® now delivers a completepost trade automation solution capability for our clients. TLM® empowers them toprocess trade confirmations and settlement instructions irrespective of serviceprovider or originating format.”

As the financial markets have started to see rising transaction volumes, institutions andoutsourcers are addressing the challenge of building automated, volume insensitiveMiddle and Back Office processes. With certification achieved SmartStream is wellpositioned to provide a compelling solution to this challenge.

Gold awarded for the 7th consecutive yearSmartStream has been awarded the 2004 SWIFTReady Gold award for Securities, CashReconciliation and Trade Finance products. Joel Ludvigsen, Head of Partner Solutions atSWIFT commented, “We are delighted to award SmartStream the Gold Accreditation forCash and Securities Reconciliation for both SSR and Corona. Despite the requirementsgrowing year on year, SmartStream’s forward thinking development strategy has enabledit to consistently achieve the highest level of accreditation for their products.”

A selection of new contracts

Ch ina • F rance • Germany • I nd i a • I t a l y • S ingapo re • Spa in • Sw i t ze r l and • UK

Abbey

ANZ

Bank Leumi

Citibank

Commerzbank

Fortis Bank UK

HSBC Private Bank

IDBBank

Legal & General

Lehman Brothers

Lombard International Assurance

Natexis Banquea Populaires

JP Morgan

Pioneer Investments

Prudential Assurance Ltd

SEI Investments

StateStreet

Swedbank Markets

T.Rowe Price

Travelex

UBS Investment Bank

Vanguard Investments

Wells Fargo

WestLB…

These appointments reflect our commitment to add deep industry knowledge and unparalleled value to our customers[

6

World News

The global roll out of the SmartStream STP ControlArchitecture has been extended with the appointment ofStefan Wawrzyniak as Regional Director, Asia Pacific.

Stefan will bring local management focus to drive strategic initiatives to the region.He has been well known in the Australian banking industry for more than ten yearshaving worked with IBM and more latterly Mercator. Stefan commented, “I have long been an admirer of SmartStream and am delighted to be leading such a prestigious company, the TLM® products excited me when I realised their capability in a new approach to STP in the marketplace. These products will offer SmartStreamclients in the region new operational and business efficiency.”

SmartStream has made a huge impactwith TLM® Reconciliations, which hasnow gone live and operational in some ofthe worlds leading financial institutionsincluding: HVB Group, WestLB, BrownBrothers Harriman, Newton AssetManagement, Commerzbank, NorwichUnion, State Street and Bear StearnsAsset Management.

This rapid uptake has defied the toughestmarket conditions for the financial servicesindustry and is testament to its ability todeliver real ROI. Process improvementsavings are supplemented by retiringduplicate, superfluous, multiple systems,yielding further infrastructure and staffcost reductions.

TLM® Reconciliations is the first solutionof its kind to deliver real time BusinessActivity Monitoring (BAM), as opposed topoint in time MIS. Its rich, graphicalinterface provides the user with a realtime, holistic view of all transactions, bymonitoring the trades through their entire

lifecycles. By turning to TLM’s uniqueDashBoards, users can identify high riskareas, highlight problems before theybecome critical in ensuring better STPflows and improved risk management.

SmartStream’s WebConnect enables thedelivery of TLM® Reconciliations throughthe web, engineered to be an easy and costeffective deployment model that suitsbusinesses, whether it’s an enterprise widehub, reconciliations for individual lines ofbusiness or an outsourced model. It alsoprovides the first step for companies tobuild their STP Control Architecture.

Global momentum builds for TLM®

TLM® WebConnect

Amer i ca • Aus t r a l i a • Aus t r i a • Bene lux •

Wells Fargoautomates exceptionprocessing for globalbusiness with TLM®

“Wells Fargo Institutional Investment is automating trade and exceptionprocessing for its global business toreduce the amount of risk and increasethe speed of trade processing”, saidRobin Reinfeld, VP at Wells Fargo. Theautomation will extend to trades acrossasset classes and to cross border trades.

The automation of trade processing will be completed later this year. Thecompany is using TLM® Trade ProcessManager to make the enhancements,which should result in fewer areas ofmanual intervention. Last year, thecompany fully automated exceptionsprocessing for domestic trades.“The greatest payback will result fromreducing manual effort and costs”, saidJohn Banken, VP at Wells Fargo.

Wells Fargo has also introduced a frontend Web based portal that is integratedinto its workflow engine. “Using the newfunctionality, clients can collapsemultiple trades into a single file. Theportal allows investment managers todirectly submit trade orders and ensuresgreater compliance with industrystandards such as SWIFT”, said Banken.The Web based portal will further reduceclients’ reliance on sending orders via fax.“Our goal at Wells Fargo is to eliminateall faxes”, Reinfeld said, “The client isgoing through a portal or industrystandard, reducing the risk of tradefailure.” Wells Fargo has $345bn in assetsunder administration and $167.8bn inassets under management.

Source: Operations Management

Asia Pac benefits from the continued investment in the STP Control Architecture

Stefan WawrzyniakRegional Director, Asia Pacific

NewsMatch 7

Lombard International Assuranceselected TLM® Reconciliations andInvestigations to manage theirincreasing transaction volumes withoutemploying further operational staff.

A blended project team of internal staffand SmartStream consultants completed theimplementation of TLM® Reconciliationsand Investigations in 30 days. Commentingon the successful project Paul Casey,Manager Fund Accounting, Lombard,stated, “We are delighted with this rapid Go-Live, it’s a result of great team workbetween our own staff and SmartStream’sconsultants. Whilst going through the

systems selection process the key criterionwas to identify a solution that woulddeliver us a rapid Return on Investment.

Not only did the solution have to befunctionally rich and robust to meet our needs, the implementation processneeded to be simple and fast. I’m pleasedto say that with TLM® Reconciliations and Investigations we made the right choice.”

Bank Leumi, Switzerland, is live withSmartStream’s Corona Reconciliationsolution for their Foreign Exchange, Cashand Securities transactions. Furthermore,the bank installed Corona Active, whichpro-actively notifies users of anyexceptions as early as possible in thetransaction lifecycle. Corona Investigationsis being used to automatically processidentified exceptions both pre- and post settlement.

“We received excellent support fromSmartStream’s consultants who havecustomised Corona’s rich businessfunctionality to perfectly suit our needs.Extensive interfacing to our other applicationshas enabled us to achieve Straight ThroughProcessing (STP) on an operational level withCorona being the central application usedfor inquiries. It saves us considerable timein our daily business and has improved theservice we give to our clients. This approachenables transparent investigation processes

and full risk control”, commented DavidMiller, Head of Operations in Zurich.“SmartStream’s consultants helped us to getto where we wanted to be – and they did it quickly.”

“At SmartStream we advise our clients towork towards the development of an STPControl Architecture – a non invasivesolution, which allows them to createjoined up processes, re-engineer workflowsthat leverage legacy technology and whenthe timing is right replace them. This isexactly what Bank Leumi are doing”,commented Christian Schiebl, SmartStreamCountry Manager, Germany and Switzerland.“SmartStream’s Corona Reconciliationsolution was able to quickly and easilyintegrate into the bank’s existing systemsand has already had a positive impact inremoving some of the redundancy thatcomes with multiple disparate systems,whilst at the same time it has helped themto increase their STP rates and reduce cost.”

Investor’s Bank & Trust, voted ‘BestGlobal Custodian’ two years in a row byGlobal Investor’s Global Custody, hassigned for TLM® Reconciliations &Investigations. Paul Currie, VPReconciliations & Control, comments,“IBT’s commitment to SmartStream’sTLM® solution set is a testament to ourstrong partnership and we lookforward to taking advantage of thebusiness benefits that the products willbring to our group as we put in place aplatform for growth. We will be lookingat TLM® WebConnect in the near termto offer transaction managementservices to our clients over the web.”

Fortis Bank go livewith CoronaNow fully implemented at Fortis BankUK, the Investigations solution coversall the necessary steps from reconciliation,identification and assessment ofexceptions, right through to theresolution of any errors – all in real time.The product’s ability to automaticallyinvestigate outstanding confirmations,mismatches or failed trades in real timeis vital to an organisation if they wantto speed up settlement times and reducetheir risk exposure.

David Ahmad, Head of Finance, Fortissaid, “We are pleased with the SmartStreamsolution and had no hesitation indeepening our commitment with them.Their products are used throughout theFortis Group. SmartStream’s latest moduledelivered the automation and efficiencieswe were seeking from the previouslabour intensive ‘Investigation process’within the Nostro Reconciliation function.”

Rapid delivery for Bank Leumi in Switzerland

[We are delighted with this rapid Go-Live, it is the result of great team work

Ch ina • F rance • Germany • I nd i a • I t a l y • S ingapo re • Spa in • Sw i t ze r l and • UK

‘Best Global Custodian’chooses TLM®

Lombard Go-Live on TLM® Reconciliations in record time

8

Focus on North America

Commenting on the year, Lou Longhi,Regional Director for SmartStream’s USoperations explains, “SmartStream offers acompelling proposition to the US financialservices industry even during the toughesteconomic periods. The focus on stringentcost management and increased regulationencouraged organisations to look for a way to build greater degrees of control andefficiency into their business. SmartStreamwas able to gain boardroom attention withthe STP Control Architecture vision and it’sTLM® (Transaction Lifecycle Management)solutions, demonstrating a track recordof reducing risk and cost in many of theworlds largest financial institutions.One such leading US Investment Managerrecently calculated the ROI for their TLM® Reconciliations implementation willdeliver management cost savings of $8.5min the next five years.”

Today, T. Rowe Price, State Street Bank,Wells Fargo, Bear Stearns, SEI Investments,Brown Brothers Harriman, NatexisBanques Populaires, IDBBank, Bank ofNova Scotia International are just a fewcustomers that have either purchased orgone live this year on SmartStream’sapplications for Reconciliations, ExceptionManagement, Corporate Actions or TradeProcess Management.

SmartStream has also made significantprogress in the Alternative Investment sector.A large number of US based Hedge Fundsturned to SmartStream to implementsolutions that delivered real time riskassessment, operational efficiencies andreconciliation processes.

While the global momentum undoubtedlyhelped raise SmartStream’s profile in the USdomestic market, local alliances have alsobeen a contributing factor to it’s US success.Commenting on their relationship, LindaBookheim, Business Manager, PartnerSolutions, SWIFT explains, “SmartStream’sproduct set is well suited to address theever changing requirements of the financialservices industry. They are a strong partnerof SWIFT’s and we are working very closelyto promote the use of our product sets at Tier 1 banks and Investment Managers.”

SWIFT are not alone in their endorsement of SmartStream, other key partners includeOmgeo, Advent, Delloite Consulting, Sun,CCH, SIA, FidelityXchange and DTCC haveall been active in supporting their valuepropositions in the market. One initiativeplanned is to extend a series of successfulCorporate Actions events across Canada and the US. Attendees will be able to gain a complete view on all aspects of corporateactions processing.

SmartStream’s operations in the US and Canada have beenexperiencing phenomenal growth. In the last year the company hassigned significant new contracts. It has entered new market sectorsand expanded its service operations. Having dealt with the pressuresexperienced by the rest of the financial services industry, it haswithout doubt, emerged from the last 12 months with a muchstrengthened market lead.

The future looks good for the customers and partners that we have been fostering relationships with. Together with the STP Control Architecture and our TLM® solution suite wehave a unique proposition for the market and I have everyconfidence that we will continue on our growth path. Lou Longhi, Regional Director[

Lou Longhi – Reginal DirectorSmartStream Technologies

World News

NewsMatch 9

SmartStream takesHedge Funds market by storm with Audit &Risk Control System

SmartStream has taken advantage ofthe explosive growth in the Hedge Fundsmarkets, signing multiple significantcontracts with leading Hedge Funds.In the last six months SmartStream hassigned an additional four Hedge Fundclients to add to a prestigious list thecompany’s already working with.

Hedge Funds of all sizes, Funds of Fundsand Fund Administration Outsourcers haveseen exceptional growth over the last yearand are turning to SmartStream for Audit& Risk Control solutions.

With ever increasing volumes andcomplexities of transactions occurring dailyon trading desks, Hedge Funds in particularcan be in a position where they exposethemselves to unnecessary risk withoutproper Audit & Control systems in place.It is critical that an infrastructure providesCFO’s, COO’s and Compliance Officerswith confidence that their traders arepresented with accurate security positionand cash balance information.

The strategies being traded by HedgeFunds are often complex, not onlyconsisting of multiple products involvingCash, Securities and FX products, but thefunds themselves will be traded by multipletraders in high volumes. It is not uncommonfor Audit & Control systems to have tocope with volumes in excess of 900,000trades a day. This places huge demands onany Audit & Control system to be highlyscalable. SmartStream’s TLM® solutions areunique in the market place in their scalabilityand flexibility, able to achieve unparalleledmatching rates across Cash, Securities andFX which makes them perfectly suited forthe Hedge Funds market.

With significant growth rates expected in the Hedge Funds community, firms arelooking to leverage technology to increaseefficiencies and reduce human interventionfor processes such as reconciliation.

SmartStream has been able to offer aunique solution which delivers real timeposition management integrated withexceptions processing for both Cash andSecurities. In several cases SmartStream has worked with clients to help themreconcile their portfolio positions andtransaction activity against the dataprovided by the prime brokers associated

with their portfolios. This has usuallyinvolved the solution taking feeds from up to ten prime brokers.

Additionally, the SmartStream Audit &Control solution addresses the regulatoryand reporting issues faced by the HedgeFunds. Although a long way from becominglaw, security regulatory bodies, such as theSEC, are considering a proposal whereHedge Fund managers would be required to register as investment advisors. A movethat would require the periodic review ofthe Hedge Funds book of records. With aconcrete Audit & Control process in placethe CFO can be confident that each fund is audited and reconciled accurately.

In the US, SmartStream have demonstratedtime and time again the ability to offerproven Hedge Fund Audit & Controlsolutions from a functional andtechnological perspective. With the samemarket acceptance in Europe and Asia Pac,SmartStream fully expect to have the samegrowth rate in those markets.

For more information please call the Sales Information Centre on:+1 212 763 6523 (US)+44 (0)20 7847 8012 (Europe)+65 6224 4761 (Asia Pacific)

Hedge Funds

10

OverviewSibos ‘04

Sibos, the world’s premier financial services event, attracted the Industry’s leading figures and firms to Atlanta. The conference examined the issueschallenging financial institutions and created a forum for delegates to investigate possible solutions and opportunities.


Sibos Statistics:

• 700 People enteredSmartStream’s Survey

• 484 Golf balls were on the stand

• 2 Guessed the correct number of golf balls

• 174 Product demo’s

• 3,000 Magazines were deliveredto delegates hotel rooms

SmartStream had an overwhelmingresponse to their presence at the event and the launch of their new campaign,‘Take Control’. Visitors to the stand learnthow to ‘Take Control’ of those areas of riskand cost that still exist in their operationsas SmartStream showcased new solutionsfor Cash Management, EnterpriseException Management, Middle OfficeAutomation and the latest releases inmarket leading Reconciliations andInvestigations solutions. Furthermore,on the opening day of the conferenceSmartStream’s CEO, Martin Brown,addressed a full audience at the SWIFTNetplenary session where he highlightedopportunities for SWIFTNet users to gainincreased value from their investments.

The conference theme of ‘Time for Growth’was re-inforced by the results of SmartStream’sSibos survey – the 700 visitors whocompleted the survey, forecast generalgrowth within the industry, but predicted it would not be without it’s challenges;

• 96% of respondents on day one (approx.120 delegates) believed that theirorganisation would be experiencinggrowth over the next twelve months,

• More than 50% believed they would hiremore staff in the Middle and Back Officeto manage this growth, the majority ofrespondents conceded that their existing IT infrastructure would not allow them tomanage growth and yet their IT budgetswould remain flat or show only amoderate growth (less than 5% increase).

Throughout the week SmartStreamdemonstrated how their TransactionLifecycle Management (TLM®) solutionsenable institutions to build an STPControl Architecture. By ‘Taking Control’– and implementing automated, scalableand flexible processes to support theentire transaction lifecycles firms arepositioning themselves to exploit newgrowth opportunities.

Despite their busy schedule, delegates still managed to find time to enter thecompetition by guessing the number ofgolf balls on the stand, two guessedcorrectly (484 to be precise), the drawnwinner drove off in their very own Yamaha golf car. So that people didn’t leave emptyhanded, sets of golf clubs were given awayin the daily prize draw.

Thank you to those who were able to visitour stand and we hope to see you next yearin Copenhagen.

If you missed out on the experience, it’snot too late to see a product demonstrationor request information.


TakeControl

NewsMatch 11

Cash Management

Operating costs come with the territory,they are a known evil of the business ofbusiness. Whilst every effort is made to limit costs, when one that could have been avoided lands on your desk you find yourself going through the same oldprocess: tracking back through the life ofthe trade to fathom out what went wrongand where it went wrong.

Operating costs hit hard and yet thoseimposed by a third party seem easier toswallow than those imposed internally byyour own Treasury Department for poorCash Management practices. Relationsbetween the two departments often becomestrained as arguments ensue and OpsManagers attempt to reduce the internalcosts imposed by their own CashManagement department.

The Cash Management department providesa service without which an organisationcannot properly function. They provideTreasury with the information required tomanage the banks cash flow. For operatingdepartments they manage cash movementsand ensure cash accounts are funded correctly.They also close the loop on the process by

ensuring that what was funded is what wasposted to the appropriate cash account.It is therefore surprising that given theimportance of the Cash Managementfunction and the propensity for poorpractices to generate unnecessary costs,for many financial institutions, CashManagement remains a manual process.

So what’s the solution? Put simply, it’s realtime control and predictability. Tightercontrol on cash account activity andupfront reconciliation of predicted andactual cash movements allowingcorrections to be made in real time can make significant contributions toreducing operational costs.

SmartStream’s TLM® Cash Managementdelivers exactly this, through a single,global view across all currencies andaccounts in real time, providing anaccurate view of balances and current riskprofile. The solution captures transactiondata from any internal or external source,facilitating the calculation and projectionof funding, borrowing and lendingrequirements on an enterprise wide basis,ensuring that all balances are fully utilised.

Shortfalls are projected and same day failsaccounted for, prior to market closure.This reduces the cost of covering overdraftsby ensuring responsible parties are aware of funding requirements as they occur,enabling them to act faster to managebalances more efficiently.

With TLM® Cash Management it’s possibletoday to stem the haemorrhage ofunnecessary operating costs associated with manual processing. Cash Managementfunctions are empowered and cancontribute directly to the bottom line,becoming a trusted business partner to the operating units – a big leap forward.

TLM® Cash Management delivers:

• Automated Sweeping

• Real Time Reconciliation & Exception Management

• Real Time visibility: Analysis & Reporting

• DashBoard for Proactive Control

• Futureproofing for Real Time Nostro

• Comprehensive, Integrated andScalable Enterprise Wide Cash Management

Cash Management |

The big leap forward

Operating departments continue to haemorrhage unnecessaryoperating costs as they adhere to manual cash managementprocesses. Maria Perry, Product Manager, asks why and what’sthe solution?

Maria Perry – Product ManagerSmartStream Technologies

In principle, outsourcing seems a logicalresponse to today’s business environment,which places great emphasis on the metricsof driving down fixed cost, improvingperformance and ensuring transparency.The frequency of needing to make Backand Middle Office improvements isintensifying as a result of market andregulatory changes, resulting in the cost of supporting continuous improvements to IT infrastructure becoming prohibitive.Indeed, the costs for many buy-side firmsare rising at 6-9 percent per year, accordingto a 2002 survey by Price WaterhouseCoopers and 30 percent of a typicalinvestment manager’s cost base are spent

on the Back Office, administration andaccounting functions. To reinforce thepoint, there is the experience of hedgefunds running with the thinnestoperational base (e.g. real time positionmanagement coupled to exceptionadministration) and posting superioralpha to boot.

These figures in themselves are powerfularguments for outsourcing. With moresophisticated and demanding investors,increasingly diverse instruments, changingdistribution channels and increasingregulatory compliance requirements, fundmanagers need to expand their business to

deliver superior performance profitably.Fund managers need solutions that allowtheir cost base to withstand changes posedby a volatile operating environment,allowing them to focus on core competencies,direct IT resources to the Front Office,convert fixed to variable costs, and takeadvantage of new internet based businessmodels, such as bureau based outsourcingor web based services. They can move tomore scalable solutions once they haveconsolidated their workflows, processes andreference data onto consistent businesscontrol architectures.

These control architectures will betterenable firms to manage their cost,customer and capacity challenges inorder to demonstrate business integrityand future flexibility. SmartStream ishelping more and more outsourcingentities and agents take control of thesefactors and manage their market, creditand operational risk into the bargain byproviding a versatile, robust and scalableSTP Control Architecture. If fundmanagers and broker/dealers standaccused of failing to establish a scalablebusiness model, then outsourcing throughadoption of a future flexible businesscontrol architecture is one of the strategictools they can deploy in response.Additionally, outsourcing providers cantake comfort in the fact that SmartStream’s

12

Outsourcing

Outsourcing | The new Middle Office platform

Outsourcing will spell increased operational efficiency,greater flexibility and superior client reporting. But howexactly will fund managers stand to gain and by when?

TLM® IM Outsourcing Platform

Lee Adams – Principal Consultant,SmartStream Technologies

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STP Control Architecture is modular,allowing providers to ‘plug and play’confirmation matching, exceptionmanagement and reconciliation applicationsinto business workflow and messagetransformation components. This enablesoutsourcing providers to offer solutions totheir clients which are ‘best in class’ and fitfor purpose, irrespective of the business orregulatory climate ahead.

If the future is indeterminate, the cost ofstaying in the technological rat race willdefeat all but the nimblest and most flexibleentities. The key to success therefore will bethe extent by which outsourcingarrangements are maintained as a mediumto long term client partnerships in orderthat operational efficiencies are not achievedat the expense of shareholder value. Thisapplies equally to sell-side players who arealso feeling the pinch of tighter margins andare facing the challenges of unbundlingresearch coupled with pressures oncommission margins. The broker/dealermarket is easier to predict, as experience in standard setting, market practice setting,the self-clearing and CCP worlds haveindicated. But in relation to outsourcing of particular functions, the intrinsics ofsell-side deals are harder to price andthinner on the ground.

The very large securities firms such as globalcustodians (where the top 10 effectivelyrepresent 85% of the market in custodyassets) have the ability to invest continuallybehind robust products. They can maintainsecurities master-files in central systems,which avoid the need for the client to makemultiple internal data reconciliations inareas such as reference data. They also havethe economy of scale in terms of systems(best of breed) and staff to offer a servicebeyond the pocket of the typical fundmanager last, and not least, they clearly have the capital base to pay up if somethinggoes wrong.

However, even the big players in theoutsourcing arena cannot afford to becomplacent. They too face the challenge ofstretching their technical budgets to keeptheir core robust, legacy processing systemsrunning whilst offering new advancedtechnical features. The quintessential tradeoperations solution, which is a combinationof trade process management, exceptionhandling for those workflows, businessactivity monitoring and product/instrument-based process flows, will win out. It is thisrequirement that dictates the adoption ofa flexible technical solution such asSmartStream’s STP Control Architecture inorder to provide an agile, configurable BusinessService Provider platform for Outsourcing.

In summary, the proviso is the extent towhich firms feel comfortable aboutoutsourcing. Clearly if there is setaccountability for each process and the latter is conducted by a professional serviceprovider with a capacity to offer significantinvestment, superior technical performanceand global bandwidth, there is an attractivetrade-off by way of risk/return. It should benoted that outsourcing is not a panacea andcaution remains the watchword especially inrelation to the strategic irreversibility of thedecision or the long-term asset-servicingvalue surrendered to the provider. Againstthis must be balanced the core competency /centre of excellence argument. All thingsbeing equal the service being provided mustbe seen as first class to warrant the upheavaland risk; potential clients should expect thebest meaning a world class service based on a robust and sophisticated platform.This being the case firms comfort factor will increase and the trend to outsourcingwill continue, the quality of the servicebeing offered will be what tips the scalesand places Outsourcing in the ascendancy.


14

A Lifecycle approach to Reconciliations &Exception Management

Reconciliations

Opportunities to reduce cost and at the same time optimise the use ofcapital in cash management are all too infrequent – but they do exist.Steve Moss, Business Development Director, presents the significantbenefits that are available when firms re-engineer their Reconciliations and Exception Management processes to adopt a lifecycle approach.

For some time now the term GenericReconciliations has been banded around the market place to infer that aReconciliations solution is capable ofmatching ‘anything’ to ‘anything’.However, in reality this claim is oftenmisconstrued as the majority of availableReconciliations solutions are only capableof matching the ‘same anything’ to the‘same anything’. Additionally, the matchingtends to happen only once, before the data requires reloading when it can bematched again.

Whilst a single solution capable of beingdeployed across different lines of businessand used to match different financialinstruments does provide some benefit, itfails to deliver the maximum possible value.

SmartStream’s Transaction LifecycleManagement (TLM®) Reconciliationsdistinguishes itself by offering a uniquelifecycle approach, with the truly genericcapability to match different ‘anythings’together and can do so from transaction

inception to settlement. This may seemlike a small distinction but the impact ishuge. Fig 1. highlights the differencebetween these two approaches.

The One-to-One approach grew out of thetraditional reconciliations models wherereconciliations functions treated cash inisolation from the firm’s asset reconciliationand Intra day processes were isolated fromend of day processes. The advocates of thisapproach were typically point solutionvendors that had grown up serving variousniches, some focusing on just confirmationmatching, others with a mastery of the cashworld. The other trait of the One-to-Oneapproach was that the model traditionallymanaged batch processes rather than real time.

Today firms have realised that the One-to-One model is not enabling themto address their issues of cost and riskreduction. Additionally, as they look tobuild scalable, automated processes toaccommodate future growth they are

finding the limits of the approach: Asmatching happens only once, rather thanacross an entire transaction lifecycle, themodel does little to reduce the number of exceptions.This means all toofrequently firms end up applyingunnecessary and costly resource to deal with exception management.

SmartStream’s early investments in the Lifecycle approach means that thecompany now leads the market inproducing truly generic reconciliationssolutions. TLM® Reconciliations is uniquein delivering multi way, multi transactionmodels that are required for a lifecycleapproach. Capable of managing transactionsover time periods that may stretch overmany days, this new approach has provideda real time alternative to batch processing.

To achieve this new approach,SmartStream has had to build manyfeatures into TLM® that have typicallybeen left out of Reconciliationsarchitectures. Integrated workflow

Steve Moss – BusinessDevelopment Director,SmartStream Technologies

and rules engines are needed to controlthe exception points throughout thelifecycle. The ability to manage multiplemessage types and formats needed to beincorporated in order to allow the mergingof traditional asset and cash reconciliationprocesses. In producing TLM® SmartStreamrecognised that it had to deliver everythingthat was available in separate processes –but in a combined process.

A lifecycle approach that deals with multi way, multi transaction models,is fast becoming best practice for cashmanagement, intersystem reconciliationsand the merging of traditionalreconciliations processes. The potentialadvantage for firms merging asset andcash reconciliations processes is theability to consolidate the process.By employing Intra day matching of

settlements, followed by an end of daymatch as a double check, end of dayprocessing can retire in a structured way– again consolidating processes.

As for Inter-systems Reconciliations itallows firms to only load the transactiondata once. By reducing hundreds ofreconciliations to a handful, means areduction in the number of exceptionsraised – ultimately lowering the cost ofexception management.

Where organisations have custom lifecyclerequirements, TLM® is empowering themto continue to identify ways of managingrisk and cost. They are also realising thataddressing the problem of audit andcontrol from a lifecycle perspective doesn’tmean jumping in with both feet – thisapproach can be incrementally adopted.Many organisations are starting with asingle transaction focus, and mergingseparate processes over time and expandingthe ROI they can gain as they consolidatetheir processes across transaction lifecycles.

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[Today firms have realised that the One-to-One model doesnot enable them to address theirissues of cost and risk reduction

The strength of the lifecycle model

Are Investment Funds the last great virginterritory for STP?

Automation of post settlement tasks likereconciliation is now widespread in thesecurities processing world and even riskyand complex areas like corporate actionsare, with a number of industry initiativeslike ISO 15022 messaging and the re-engineering of the SWIFT corporateactions messages, now becoming serioustargets for process automation.(See Mission Possible article on page 24)

However, the world of Investment Fundshas traditionally been an area slow to takeon STP. Whilst generally divisions of largerorganisations with interests in manydifferent areas, the funds businesses have not had the same focus on automation asother divisions within the parent. This issomewhat surprising because the fundstransaction lifecycle has similar processingsteps as, for example, a standard equityworkflow, just with different names.Instead of buys and sells it has subscriptionsand redemptions. It has the equivalent of abuy and a sell-side, except that in this casethey are called distributors and transferagents / fund administrators. Furthermore,fund owners still want to calculate fundvalues on a regular basis, so the comparableprocess to asset reconciliation and thenmarking to market, is, in the investmentfunds world, the calculation of fund price,for example Net Asset Value (NAV), basedon the value of underlying fund assets.

Until this year, almost all of these processesin the investment funds industry have beenmanual. Overall it is estimated that theEuropean fund industry has been spendingup to €5bn annually on manual processes.Parties exchanged faxes with each othercontaining order and confirmation detailsand end of day price reports. Teams of staffwould then update accounting and othersystems by hand with lots of manualchecking and re-keying. Obviously thelarger the organisation in terms of volumeof message flow the larger the STPproblem. The effect on risk and cost ofmanual administrative processes should bea story familiar to everyone in the industry.

The main reason that the funds industry is predominantly manual is that none ofthe usual suspects has so far offered this€6.5 Trillion European and Asia Pacificmarket (the US is already automated), amechanism to automate the message flowsbetween counterparties. Now finally,someone has, with SWIFT creating theSWIFTNet Funds initiative. Essentiallywhat SWIFT is providing in this area is:1) electronic, machine readable, messagestandards jointly developed with theindustry for common domestic and crossborder flows, 2) the SWIFTNet IP networkto carry the messages on and 3) a commonmessaging service running on the network.In other words similar to the genericrequirements of any SWIFTNet businessservice. Of course, one of SWIFT’s keyaims is to increase traffic on their IPnetwork and this is a good way of doing it.The benefit to the firm of using the IPnetwork is that their existing connectioncan be re-used for this new traffic, savingon network costs.

16

SWIFTNet

[the world of InvestmentFunds has traditionallybeen an area slow to take on STP

The XML versions of the message typeshave only recently been made available.To fill the gap and maintain themomentum of interest it found in theindustry, in 2001, SWIFT decided tolaunch enhanced versions of the currentFIN MT 502 order message and MT 515confirmation messages. These differentmessage sets will co-exist, with end 2006chosen as the milestone to get all playersusing the FIN MT’s enabled to handle thenew ISO XML messages as well. This hasgiven some of the players in the industrythe challenge of having to find ways ofreceiving FIN messages from some clientsand XML messages from others. Of course,they have to know in what format to sendback the confirmations.

Moving forward, the SWIFT approach canoffer the industry many advantages. SWIFT/industry reviews have shown that it costsfour times as much to process ordersmanually compared to the automated useof FIN messages. The XML messagesshould further decrease cost per order.Because of the availability of machinereadable messages it means that for thefirst time, the industry can take inmessages electronically and automaticallyintegrate these transactions and businessflows with their existing systems in theways that best suit them.

Firms now have the opportunity to re-architect their operations processes,by using SmartStream’s ProcessAutomation (TLM® PA) software to createa truly Straight Through Process. Themajority of transactions will flow throughthe system untouched, with onlineexception management functionality toallow staff to concentrate on the fails.Traffic can be automatically formatted inFIN or XML according to the counterpartyrequirement and routed accordingly.Matching functionality can be leveraged to automate the previous manual and error prone order to confirmation match.

Furthermore, it is now possible toautomate one of the most complex areasof funds processing – NAV reconciliations.A typical firm may have to reconcileperhaps 200 funds with each fund holding2000 lines of stock. The firm will want toreconcile the fund at both the top, NAV,level and also at the ‘bucket’ level – sum of security transactions, FX P&L, accruedinterest, assets & liabilities, capital bonds & shares, settled cash, etc. If the ‘buckets’don’t reconcile with the NAV then furtherinvestigation into the underlyingtransactions is needed to find the breaks –therefore both reconciliation acrossproduct and across the different levels isneeded. Quite a sophisticated requirementbut now very achievable.

What’s new with the SWIFTNet Fundsinitiative is that each of these tasks can nowbe connected together into a seamlessautomated business process – externalcounterparty communications usingSWIFTNet, the automation of message flowinternally between systems, people andtrading partners, Automated Matching &Reconciliation, Exception Management &Reporting. It seems that the industry is,by and large, very enthusiastic about theinitiative. Almost a hundred firms are nowusing the FIN message types for the exchangeof orders and confirmations and the XMLmessage pilot started in Summer 2004.Whilst SWIFT would have been happy withfive participants in the pilot, sixteen firms,from all sides of the industry, actually signedup. So it seems that one of the last areas ofmanual processing could be about to fall tothe onward march of STP.


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[firms now have the opportunity to re-architect theiroperations processes, by using SmartStream’s TLM® PAsoftware to create a truly Straight Through Process

18

FIX Standardisation

Over the last decade the FIX protocol has trulymigrated from a value added function into anindispensable component without whichfirms are likely to lose revenues (Fig 1).

While FIX has always been a force to bereckoned with in the battle for Front Office STP,its influence in the post trade lifecycle has beenminimal so far. However with the introductionof FIX, version 4.4, there are signs that thiscould change. There is a distinct possibility thatFIX 4.4 could become a cornerstone in posttrade STP. We use the term ‘possibility’ asexperience has taught that bold claims havehitherto come to nothing unless there is agroundswell of support, a regulatory imperativeor a compelling business case to make. It is ourbelief that there is a business case to be made interms of STP, but in terms of a new paradigmspanning all business lines.

The search for a business caseIf there is a business case to be made, it stemsfrom traders and compliance desks gettingrestive under the twin pressures ofdemonstrating ‘best execution’ processes tosatisfy the needs of portfolio managers, plansponsors and regulators on the one hand andlowering the end to end cost per trade to satisfythe bottom line on the other. With narrowingmargins and greater scrutiny from bench-marking entities and regulators, more tradersare looking at costs, liquidity risks and theimpact on reputation risk of funding fails.

If anything, the burden on tradingperformance in the Middle Office is likely togrow turning into a profit centre and not just a cost centre. For firms to do this as well asachieve greater business integrity, there is a real need to raise the game with regard tostandardisation across all asset classes and toprovide better control architectures, allowingusers to manage their liquidity across the board.

Against this backdrop, investment banks andlarger fund managers are considering modelsfor maximising liquidity for lowered marketimpact and opportunity costs. The increasingdrive towards hedge funds styles for reasons ofperformance as well as attractive costs per tradeshows that hedge funds can operate withoutsuffering large market impact costs ormaintaining large operations departments.

In designing their systems around real timeposition keeping and exceptions managementin collaboration with their prime brokers andother outsourcing providers, hedge funds candemonstrate better business controls associatedwith pre-emptive business practices, whichtranslate into lower costs per trade end to end.

The triple trends towards diverse models ofwealth management, new business modelsand increasing regulation has also changed the basis of competition among marketintermediaries and suppliers alike. This trend will itself cause more firms to pursuecommon market practices around the use of FIX standardisation protocols andencourage greater consideration around FIX-hub service bureau options.

The importance of appropriateworkflow handling and business controlsThe concept of workflow and rules engines isalready pervasive, but the newer trend in thefinancial industry is the ability to monitor,measure and manage performance and risks,particularly operational risks, in order toprovide superior service or price improvementagainst the competition, or to comply withincreasingly intensive regulatory requirements.The presentation of data from other systems or sources is essential, as no one application,system or vendor controls all data.

Lee Adams, Principal Consultant,examines the implications ofFIX 4.4 both pre- & post-trade

FIX | Ripples create waves in the Middle Office

[the burden on tradingperformance in the MiddleOffice is likely to grow

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An appropriate control architecture, such asSmartStream’s STP Control Architecture (Fig 2)ensures customers don’t need to configureinterfaces because there are already adaptersand message libraries available. Thepresentation layer provides the ability todeliver, through a single user interface, all the information for a single process flow.This provides the ability for users to go toone place to see any confirmation, exception,performance or positional information. Inaddition to providing gateways to othersystems, real time information flows rely onaccessing the business artifacts of thedomains serviced. The business artifacts referto the business components essential topower transaction or cash flows for StraightThrough Processing. This means integration toevent and rules based workflows that theindustry demands.

Today, the market demands flexible andconfigurable user interfaces and that these beweb based, based on industry standards andcapable of delivering the right information in a useable format to the rest of the businesscommunity. By adopting DashBoards to createan active desktop control system that changesin real time, to give users better control overperformance, allowing them to pinpointconfirmations, allocations, affirmations andexceptions immediately.

From caveats to communitiesBefore predicting the all-pervasiveness ofFIX 4.4, it is fair to cover the positive benefitsand pitfalls to consider in the context of pre-to post-trade/settlement processing. Greatercompetition in the post-trade arena betweenmore suppliers such as order managementvendors, FIX engine suppliers and ATSs canonly be beneficial in terms of promotinginnovation and lowering the cost per trade.New models might remove the onus forpopulating SSI data from the fund managersand move this to the custodians, resolvingmany liability issues associated with thereference data between the two constituencies.New models might also permit sub-accountsto be linked to the correct party.

On the other hand, one should be mindfulthat FIX 4.4 is a protocol/set of guidelines.FIX 4.4 will be neither ‘out-of-the-box’ nor

‘plug and play’, so further software may beneeded to build the messages and ensuresemantic and syntactic presentation, which in turn may necessitate reconfiguration ofexisting trade confirmation processes tosome degree. There will be concerns if thestandard is not ‘stable’ and a collective cost of transitions if insufficient regard is paid to the pace of innovation of new versions.FIX 4.4 will not be a substitute for the needfor collective market practices nor trade hub solution.

So are the planets coming into alignment forallocation STP? It is evident that a communityof users is needed to ensure a high quality ofconnectivity; and that switching costs fromperfectly serviceable, well managedcommunities such as Omgeo or TradeWeb willhave to be factored in. There is still plenty ofwork to do but there is business momentumand the building blocks are all in place to notonly raise the game with regard to tradeconfirmation pan-asset class but spanningFront and Middle Offices as well. The mostappropriate control architectures will dependupon the right connectivity components andbusiness artifacts. It may be too early to say if FIX 4.4 will force a wave of change in posttrade STP but it has the right credentials andtogether with SmartStream’s STP ControlArchitecture the building blocks are all in place to deliver true allocation level STP.

[a single window forconfirmations, exceptions,performance & positionalinformation provides control

Fig 1: Evolution of FIX Fig 2: SmartStream’s STP Control Architecture (The Components)

Web Strategy | Breakingdown the barriers across the lifecycle

20

Web Strategy

Web based enterprise applications are mainstream featuresin many areas of business, but adoption in Middle and BackOffice functions has so far been light. Neil Vernon, ProductManager, discusses how organisations like WestLB areleading the way and pursuing a Web strategy to lower costand seek productivity gains.

Browser based user interfaces foroperational users in the Middle and BackOffice are still relatively scarce outside ofthe areas of reporting and adhoc enquiries.However, they are becoming increasinglyattractive as technology has evolved toprovide secure, scalable, easy to use pureinternet applications. Firms haverecognised the cost savings that areavailable compared to traditional thickclient environments.

The other compelling factor that’s drivingincreased interest is the recognition thatthe web is a unifying technology forapplication presentation. As Middle andBack Office operations seek to managetransactions across their entire lifecyclethey need to incorporate multipleapplications and data feeds. A web basedpresentation of this information canprovide users with a single portal acrossthe entire transaction lifecycle.

TLM® WebConnect

Neil Vernon – Product Manager,SmartStream Technologies

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To date one of the main barriers toadoption of browser based interfaces hasbeen the inability of vendors to provide a user interface that delivers the samefunctionality and information as a thickclient. However, with TLM® WebConnect,SmartStream have removed that barrier.TLM® WebConnect doesn’t compromiseon the functionality or delivery ofinformation to users. With the integratedDesign Studio, TLM® allows the customcreation of DashBoards, page layouts, styleand content; all delivered through a designarchitected user interface.

Today, companies like WestLB are usingTLM® WebConnect to distribute audit,control and transaction lifecycleinformation throughout the organisation.For the first time, TLM® WebConnect isallowing the reconciliations &investigations departments in WestLB’sDüsseldorf and London operations to havea single, unified system to process, investigate,manage and report on all transactions.

Leigh Robinson, Director OperationsControl, WestLB, explains the bank’sstrategy, “The first stage in the project is to standardise on SmartStream’s TLM®

Reconciliations as the strategic solution to manage global reconciliations of allfinancial instruments. By replacing avariety of reconciliation and investigationtools we will be able to streamline ourreconciliations process, centrally control all breaks and create a flexible operationsteam capable of supporting the variableworkloads across our operations inLondon and Düsseldorf. TLM® WebConnectis central to the enterprise wide Audit andControl Architecture. It allows WestLB tocost effectively roll out reconciliations &exceptions management functionality andinformation to our large and geographicallydispersed user base.”

The deployment cost savings Leighhighlights are not the only savingsavailable. Distributed organisations likeWestLB, that need to provide users withaccess to reconciliations and exceptionsmanagement data can do so withouthaving to host client server basedapplications on costly Citrix farms. As athoroughly modern, scalable J2EE service,TLM® WebConnect has proved to be a more cost effective and highperforming alternative. Additionally, onceapplications are available on the web,providing secure access to external partiesbecomes easier. Customer service can be

improved as customers can be granted safe access to see their reconciled positionswhenever they need to.

As WestLB show by moving reconciliationsand exception management processes tothe web it’s possible to gain tangiblebenefits, however, not all web applicationsare equal. TLM® WebConnect provides anumber of unique features that form thecore requirements for a successful Middleand Back Office web strategy:

TLM® WebConnect provides:

• A zero footprint, zero download,firewall neutral client.

• Scalability to allow organisations to be insensitive to volume fluctuations.

• An integrated Design Studio to createand customise DashBoards that aredelivered through an intuitive graphicaluser interface.

• A comprehensive web solution, capableof integrating within the existingcorporate web/portal strategy.

[WestLB are using TLM® WebConnect to distribute audit, control and transaction lifecycleinformation throughout the organisation

22

CoronaDevelopments

SmartStream’s best of breed solution has just got better

SmartStream’s Corona solution has been at the forefront of multi-product transaction management throughout thelast 30 years. By utilising this expertise, Wolfgang Prinz,Head of Corona Product Management, is pleased toannounce SmartStream’s biggest release to date with the general availability of its market leading integratedReconciliations and Exception Management solution.

Corona 7.0 delivers both major functionaland technical developments, demonstratingthe company’s commitment to providing anintegrated approach to Transaction LifecycleManagement. The wealth of newfunctionality combined with the productsproven track record will be compelling tonew and existing customers alike.

Completely new functionality delivered withversion 7.0 includes Corona Generic, CoronaCorporate Actions and Corona WebConnect.The solution enhances Corona Cash,Corona Securities, Corona Confirmationsand Corona Intra day for the reconciliationof accounts, securities, forex, money marketand derivative messages as well as cashmessages. Furthermore, there has beenconsiderable investment in CoronaInvestigations, which automates theprocessing of exceptions and Corona Active,the system wide risk management monitor.

In addition, the new mainframe CoronaEnterprise Edition is especially designedfor banks with high transaction volumes

and comprehensive functional requirements.Corona Enterprise Edition optimisesserver resources and enables systemadministrators to use common tools formonitoring and controlling processes.

Corona Generic provides an ‘anything toanything’ capability for reconciliation.The benefit to customers is twofold, firstlyCorona Generic delivers the capability for financial institutions to manage non-standard reconciliations and secondly it allows reconciliation across the completelifecycle of the transaction.

As customers move to deploying a ‘RecsEverywhere’ strategy – where reconciliationsare used across the enterprise and throughoutthe lifecycle of a transaction – there is asearch to manage non-standardreconciliations. Corona Generic is ‘agnostic’in terms of its ability to take in differentfeeds and is capable of working across theentire range of financial instruments.

Wolfgang Prinz – Head of Corona Product Management,SmartStream Technologies

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Corona Product Centre, Vienna

Most firms are migrating from batch to real time processing to minimise their riskassociated with missing or manual Intra dayreport processing. Corona 7.0 delivers theCorona Intra day module which provides a solution to this problem, allowingorganisations better control over real time risk management and allowing them to meet ever more demanding service levelagreements. The FX market is a greatexample of a market that is increasinglyreliant upon Intra day reconciliation. CLSmembers as well as third parties need to beable to carry out Intra day reconciliations inorder to ensure that their accounts arecovered sufficiently in avoiding Intra dayinterest payments. However, the FX marketis not unique, other sectors of the financialservices are also being driven by marketinitiatives such as Basel II, Real Time Nostroor SWIFT’s Nostro Account Informationinitiative, to use Intra day reconciliations.Corona Intra day provides a real timereconciliation solution to provide Intra dayliquidity management and risk managementacross all sectors of the industry.

Corona 7.0 also delivers Corona CorporateActions, which manages the scheduling andreconciliation of corporate actions. Themodule is ISO 15022 compliant, enablingthe solution to load corporate actionsSWIFT messages and alternative formats.It automatically creates diary entries fromincoming notifications, manages theinstruction and then tracks and records thestatus and confirmation of the corporateaction. The module is fully integrated withthe alerting and exception managementfacilities of Corona.

The modules can now be accessed through a new highly scalable, browser based, userinterface, Corona WebConnect. This allowsreal time monitoring and management of information through DashBoardfunctionality, where relevant information is displayed to business users in recognisableformats of charts and graphs. For firmslooking to deploy the application in multiplesites the browser based client delivers majorsavings in both resources and cost asinstallation can be managed remotely.

The wealth of functionality that SmartStreamhave delivered in Corona 7.0 will ensure thatthe product remains the market leadingintegrated reconciliation and exceptionmanagement solution. By working closelywith our large, global customer base weare confident that Corona will continue to deliver unrivalled matching rates andallow customers to reduce risk and gaingreater control and visibility over theirtransaction lifecycles.


[the wealth of new functionalitycombined with the products proventrack record will be compelling to new and existing customers alike

Generic | Intra day Corporate Actions | WebConnect

24

Corporate Actions

The key to successfully processing andultimately automating the corporateactions environment starts byunderstanding and controlling the entireevent lifecycle. Too many attempts toautomate corporate actions have failed todeliver a holistic approach to the functionand to truly understand and integrate thekey peripheral processes outside of thecorporate actions environment.

Mission PossibleAutomating Corporate Actions

Corporate actions is often still said to be one of the most complicated BackOffice process areas to attain a significant and satisfactory level of automation.However, in reality, barriers to automation have been falling and there’s neverbeen a better time to seize the risk and cost reductions that are attainable.

Leading financial institutions around the world are adopting SmartStream’sTransaction Lifecycle Management (TLM®) as a solution to the diverseproblems associated with corporate actions. Paul Philips, Consultant,explains why automating corporate actions is now Mission Possible.

Paul Phillips – Consultant,SmartStream Technologies

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SmartStream’s lifecycle approach tocorporate actions automation identifiesfour broad process areas that need to beaddressed to create an integrated corporateactions function;

• Managing the capture, cleansing anddistribution of corporate actionsrelated information from whicheversources in whatever format.

• Managing accurate proprietary andclient stock positions by controllingthe flow of information, from tradecapture through the settlement cycle and into the reconciliationenvironment.

• Managing the capture of voluntaryevent elections and streamlining theprocess and broadening the window of opportunity for the decision maker.

• Managing the accurate calculation ofdue entitlements and generating thecorrect entitlement transactions.

Using the right data?Data provision has become a verycompetitive business and companies willoften rely on many different data sourcesto achieve as wide ranging a view of eventsas possible with which to determineaccurate information for processing. Thisdata not only contains corporate actionsinformation but also security static dataand pricing information, all of which isused at some point, either directly orindirectly, for processing an event.

Custodians and data vendors are reliedupon to provide accurate and timelyinformation, however it is often submittedsporadically, from multiple sources and ina variety of formats. Cleansing of the datato produce an accurate Golden Record isnow possible to achieve automatically.Integrated within SmartStream’s TLM®

Corporate Actions are the Reference DataManagement and Event Managementmodules. Together these modules providea multi entity, multi market and multicurrency event data cleansing solution for all types of corporate actions.

In an automated environment themaintenance of accurate static data isimportant to ensure that events are createdon the correct securities, that tradableinterim entitlements such as rights, optionsand warrants are available within theinternal securities universe. In so doing it’s possible for entitlements to be createdwithin the processing environment.

Without accurate security static dataorganisations are exposed to significantproblems within the reconciliationenvironment as positions may begenerated from corporate actions that do not actually exist in the real world.

The final, internal source of data comesfrom the Front Office. Processors relyconstantly on fund managers and tradersto provide election decisions onvoluntary events that may not arriveuntil the absolute deadline. This placesenormous pressure on the processor tocorrectly resolve and distribute electionsaccurately, on time and to the intendedcounterpart or custodian. TLM®

Corporate Actions provides the FrontOffice with a user friendly, on-lineVoluntary Response Tracking mechanismwhich automates the election process,massively reducing the risks associatedwith missing an election deadline.

What’s your position?Ensuring accurate proprietary and clientstock positions is another cornerstone toaccurate event processing. Unless theentire flow of information, from tradecapture, through the entire settlementlifecycle and into the reconciliationenvironment is controlled it is impossibleto achieve any level of balance accuracyand thus mitigate the associated risks.

If the settlements department is unable to provide accurate positions andtransactions then the reconciliationdepartment is unable to balance internalpositions with real world balances at the custody and depository level. Suchbreaks in balances can prove to becatastrophic if captured within a

voluntary event such as a rights issue,which, if processed inaccurately, can causesignificant financial loss to an organisation.

But what should I get?By accurately capturing the correct stock record, calculating the correct dueentitlement and generating the correctentitlement transactions back into thedownstream support applications it ispossible to ensure that proprietary andclient entitlement positions are correctlyaccounted for, funded against and segregatedfor inward and outward distribution.

TLM® Corporate Actions’ EventManagement module is an entirelyconfigurable rules based processing engine.Using an intelligent options drivenapproach to entitlement calculation, TLM®

is able to determine the type of entitlementto be generated, the associated security orcurrency to be adopted and the actualentitlement each position captured withinthe stock record is due to receive. Oncecalculated, the entitlement can beautomatically generated into the relevanttransaction within the Back Office supportapplication, eliminating the need formanual intervention.

SmartStream is working with institutions inevery major time zone to realise the benefitsof TLM® Corporate Actions. Inversis Bancoin Spain, T.Rowe Price in the US andVanguard Investments in Australia are just a few of the customers automating andcontrolling their entire corporate actionsprocess – from data collection, cleansingand management through to accurateentitlement management. By adopting thislifecycle approach to corporate actions theyare eliminating manual processes, removingrisk and cost and demonstrating thatbreaking through the barriers to automationis, today, a reality not just a possibility.


26

Partnerships:Omgeo

STPa sharedresponsibility

In order to alleviate cost and ensure tradeprocessing accuracy, market participantshave recently uncovered new tradingtrends to carefully manoeuvre theirorganisations and clients through anumber of wild market swings.

Program trading, for instance, is on the risemarking more than half of the NYSEvolume. However, as trading volumes rise,so too does the opportunity for risk facingsecurities firms. While enjoying an increasein business, many organisations are stillfeeling the residual effects of the tightenedpurse strings of years’ past – when investmentin Back Office technology was slow.

Are firms ready to handle more volumes,especially when 44% of trades worldwideare still processed manually via fax, e-mailand phone? Are firms leveraging the fullpotential of IT investments?

Biting the bulletTo date, many fund managers have investedin portfolio and order management systemsto automate Front Office processes so thatthey are able to handle volume peaks.However, lower investments in the BackOffice have left firms exposed to risk.

Those firms that persist in using out ofdate methods of trade processing may findthemselves swimming against a tide ofpaper and administrative tasks. As a result,accuracy and efficiency are likely to suffer.Generally, the more times a trade is‘touched’ or receives human intervention,the greater the risk of failure. Failed tradescost time and money, and – morealarmingly – cause exponential risk.

How long will firms realistically be able tosustain manual processing without makingthe necessary investment in automation

technology? TowerGroup estimates that the global securities industry will spend€17.5bn in IT in 2004, with the bulk of theinvestment coming from North America –42% of the total spend. In fact, TowerGroupprojects that asset management IT spendingwill be the fastest growth area in thesecurities industry during 2004-2008, with200 basis points more than any other area.

Staying competitiveAs firms begin to make additionalinvestments, in part to handle these spikingvolumes, many are turning to technologyto automate the complex processingmethods inherent in today’s tradingenvironment. Firms are responding topressures by not only focusing on internalprocesses and efficiencies, but also externalefficiencies and value for the client. For banksand brokers this often means implementingstate of the art technology, staying competitivein pricing, minimising market impact forclients and being able to provide access toglobal liquidity for buy-side clients.

Differentiating oneself from competitors iscritical to sustaining your business, as wellas generating new revenue. Omgeo agreeswith TowerGroup – firms’ technologyinvestment will grow over time, specificallywhere it pertains to increasing automationand STP. Why wait? There is no better timethan the present to make the investment.

Electronic automation is within your reachIn July 2001, Omgeo and SmartStreamembarked on a STP partnership to simplifytrade processing and help clients to realiseSTP. Today, the relationship continues tofocus on two main areas – streamlining thereconciliations process and enabling clientsto benefit from central matching. Bytargeting these areas, Omgeo and

SmartStream offer clients true STP solutionswhere manual processes and multiple,disparate connections, as well as theirassociated risks, are a thing of the past.

On the reconciliations front, Omgeo andSmartStream provide investment managersand custodian banks with a seamless andquick to implement solution whereinvestment managers are able to receivecustodian feeds from one source and in oneformat. The solution unites OmgeoTradeHubSM, a post-trade communicationsystem, with SmartStream’s Corona andTLM® Reconciliation solutions for the fullrange of reconciliation requirements.The result? Enhanced STP and tradingefficiencies. By centralising allocations,confirmations and transaction notificationmanagement through a single hub from onesource, to one destination and in oneformat, users realise enhanced data integrityand a streamlined process. Gone are thedays of paper reports and manual processes,as are the days of multiple feeds and formats.

The same is true with our central matchingpartnership. Here too, we have eliminatedthe need for manual processes whilestreamlining the trade process. Our centralmatching solution combines SmartStream’sTLM® Process Automation, a businessprocess management solution that quicklyand efficiently connects internal and externalsystems, as well as several industry protocolsincluding FIX and SWIFT, to OmgeoCentral Trade Manager (Omgeo CTMSM), astate of the art STP solution for processingyour trades from execution to settlement.

Through this partnership, we haveeliminated the need for our clients tointegrate solutions on their own, insteadoffering more complete, certified solutionsdesigned to help meet STP goals.

Kathy Ball-Toncic – ExecutiveDirector, Global Partners, Omgeo

SmartStream Technologies

SmartStream Technologies is the undisputedmarket leading provider of TransactionManagement (TLM®) solutions. The companyhas a 37% market share and over 1,100clients globally, including 75 of the world’stop 100 banks.

By delivering state of the art software,implementation and global 24x7 supportservices, SmartStream is uniquelypositioned to respond to the demands of its clients for increased efficiency andreduced operational risk.

SmartStream Technologies delivers fullyintegrated, multi-product solutions thatenable enterprise wide Transaction Lifecycle Management, from trade inception tosettlement in a single scalable platform,all within the framework of its STP Control Architecture.

SmartStream’s product portfolio includessolutions for:• Reconciliations• Business Process Automation

• BPM• BAM

• Corporate Actions• Enterprise Exception Management• Cash Management• Financial Messaging• Trade Process Management• Enterprise Application Integration (EAI)

SmartStream’s Reconciliations and TradeFinance solutions are SWIFTReady Goldaccredited and universally regarded asBest of Breed. Their flexible design enablesdeployment across the full range offinancial institutions.

The company is headquartered in the UKwith staff deployed globally in direct operationsin London, Bristol, Paris, Vienna, Zurich,Frankfurt, Luxembourg, Barcelona, Madrid,Milan, New York, Princeton, Phoenix,Singapore, Beijing, Sydney and Mumbai.

NewsMatch 27

UK – Head Office3 St. Helen's PlaceLondonEC3A 6ABTel +44 (0)20 7847 8000

UK – Product Centre1690 Park AvenueAztec WestAlmondsburyBristolBS32 4RATel +44 (0)1454 617020

Australia3 Spring StreetLevel 8Suite 1Sydney NSW 2000Tel +61 (0)2 8249 4359

AustriaVienna Twin TowerWienerbergstrasse 11A-1100 ViennaTel +43 (0)1 313 540

ChinaBldg 7Huaqiao ApartmentAnhui LaneChaoyang Dist.Beijing 100101 PRCTel +86 13 90 102 3388

France12, avenue de l'Arche92419 Courbevoie cedexLa Défense FranceTel +33 1 46 91 87 28

GermanyAn der Welle 4D-60422 Frankfurt Tel +49 (0)69 75 93 81 03

IndiaC - 7 Plot 15WICELAndheri (East) Mumbai 400 069Tel +91 22 56412525

ItalyVia Annibale Caretta1-20131 MilanoTel +39 02 7420941

Luxembourg26 Boulevard RoyalL-2449 LuxembourgTel +352 22 99 99 5576

Singapore70 Anson Road#26-01 Apex TowerSingapore 079905Tel +65 6224 7689

SpainGran Via de les Corts Catalanes 658 - 2º - 2ªE-08010 BarcelonaTel +34 (0)93 342 44 98

C/Alfonso XII - 26 - 1a PltaE-28014 MadridTel +34 (0)91 598 49 30

SwitzerlandPostfach 2214CH-8026 ZurichTel +41 (0)1 226 80 80

USA – New York61 BroadwaySuite 2824NY 10006Tel +1 212 763 6500

USA – New Jersey3150 Brunswick PikeSuite 160LawrencevillePrincetonNew Jersey 08648Tel +1 609 637 0777

USA – Phoenix4835 East Cactus RoadSuite 325ScottsdaleArizona 85254Tel +1 602 996 0450

SmartStream’s Global Offices

Information

www.smartstream-stp.com

Take Control

America • Australia • Austria • Benelux • China • France • Germany • India • Italy • Singapore • Spain • Switzerland • UK

SmartStream’s TLM® applications, workflow and integration technologyallow you to control transactions that cut across your organisation. They break through organisational silos, connecting processes and people,bringing real time visibility and predictability.

By building and automating scalable, flexible processes that support theentire lifecycle of a transaction you can reduce risk and eliminate cost.

From Account Opening through Trade Process Management to ExceptionManagement or processing of Corporate Actions – SmartStream can helpyou build an STP Control Architecture that controls the transactionsfundamental to your business.

For further information please visit:

www.smartstream-stp.com

Reconciliations

Business Process Automation

BPM

BAM

Corporate Actions

Enterprise Exception Management

Cash Management

Financial Messaging

Trade Process Management

Enterprise Application Integration

Create Your STP Control Architecture

Documents

NewsMatch - SmartStream Technologies/media/Files/www/News... · The result of our strategy is clear – today our family of Transaction Lifecycle Management (TLM®) solutions stretch