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Andrew Rafalaf
Andrew Rafalaf
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Buy- and Sell-Side Firms Look to Thomson ESG to Gauge STP Efficiency

Just how fast are we communicating trade information? Offer financial services firms an effective way to gauge straight-through processing.

Offer financial services firms an effective way to gauge straight-through processing, and chances are you’ll get more than a few takers. Since its London debut late last quarter, Thomson ESG’s ITM Benchmarks utility has garnered 12 buy- and sell-side clients on top of the 14 that participated in the pilot program. Utilizing Thomson’s Intelligent Trade Management (ITM)

three-tiered, open system architecture, ITM Benchmarks measures the efficiency and speed broker/dealers communicate trade allocations and confirmations with their money manager clients via Oasys or Oasys Global.

Chris Walsh, Thomson ESG’s director of global business development, would only name Instinet as one of the new ITM Benchmark users, joining pilot program users that include UBS Brinson on the buy side, and Warburg Dillon Read and Barclays Bank on the sell side.

While most firms are not willing to discuss the product, an executive inside one investment bank that has deployed ITM Benchmarks lauded Thomson’s efforts as a good first step, and implored other utility-type organizations such as the Depository Trust Company (DTC) to release similar tools that can help firms determine their STP efficiency.

"I think benchmarks are important, period, and the supplier, Thomson, is well-placed to give the industry that centralized type of data," says the executive. "There are suppliers that have this type of information, just like the DTC, and we would hope they do it as well."

Heeding the requests from several clients, Thomson set out late last year to build a data warehouse that would capture all the settlement data transacted through Oasys and Oasys Global, and then organize it in such a way that investment managers and brokers could measure their operational performance against competitors.

Benchmarks’ clients receive weekly reports with various measurements of their operational practices. Money managers are given details about the time it takes them to allocate and affirm or reject trades, while brokers are appraised of their average response time to report and confirm trades. Users also receive composite benchmarks of the rest of the industry with which they can gauge their operational efficiency.

With the T+1 settlement cycle looming on the horizon, and straight-through processing (STP) necessary to its success, investment managers and broker/dealers need to have, more than ever, as fluid and open a conversation about operational performance as they can.

The executive also points out that operational service has become more of a commodity, and this has lead to an increasing need for brokers to know how they stack up against their competitors. Investment managers are beginning to choose their brokers based on operational efficiency, and will parse their order flow accordingly.

"Operational service is increasingly important to the clients’ decision about where they direct their business," he says. "The important thing is to reach a minimum standard, to be one of the client’s best three or five broker/dealers. If you’re weak, relative to the major competitors, you will be reduced down the flow of business."

He hails the raw data provided by ITM Benchmarks as "good so far," but he would like to see an improved graphic-user interface (GUI), as well as the ability to tailor the reports to the individual users’ needs.

Thomson will include in version 2 — slated for a third quarter release—an upgraded delivery system which will allow users to write their own reports and import the Benchmarks data into spreadsheets so that it can be further configured. "With their own report writer and customization, users will measure themselves and generate a customized decision support system suited to their own environment," says Walsh.

Thomson will continue to offer the standard reports with the release of the customizable data. "With or without customization, we’ve seen a high-level of demand for these measures," Walsh sums up.

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