SIA SHOW: VMUs: A Landscape in Flux

Though it will undoubtedly develop to be one of the most important segments in the institutional-processing chain of tomorrow, the virtual-matching landscape has yet to take on its final form.

Announced players in the space include the Global Straight Through Processing Association, Omgeo, SunGard and Financial Models company, and it is almost a certainty that others will jump into the fray before all is said and done. That makes deciding on a VMU at this stage in the game difficult, leaving many firms content to sit back as events play out.

The space was further muddied last month when SunGard, which has just filed a CA-1 application with the Securities and Exchange Commission to operate a VMU without registering as a clearing agency, agreed to become facilities manager for the GSTPA's Transaction-Flow Manager.

"In the post-trade space, people are talking to different people," says Bob Greifeld, executive vice president of SunGard Data. "This is a space in transition. The lay of the land today will not be the lay of the land in 24 months. Everyone is taking into account their strengths and their positioning."

Greifeld says that SunGard has been in talks with the GSTPA and that it is possible the SunGard/GSTPA relationship could expand into areas like marketing, sales and customer support, though no agreement has been reached.

Paul Schneider, chief executive officer of Sungard Financial Networks, says that although he sees no conflict of interest in the facilities-management deal with GSTPA, any expansion of that relationship would have to take those concerns into account.

The relationship won't make SunGard privy to any information that a competitor should not have, says Greifeld. The deal, he says, is essentially about providing hardware, air conditioning and business-continuity plans for the TFM application.

Greifeld says that though SunGard does have to know certain information to support the TFM from a facilities-management perspective it doesn't need to know the source code.

With SunGard focusing on the domestic, U.S. market and the GSTPA, at least perceived to be, focusing on cross-border transactions, the two could form a formidable global presence to compete with Omgeo, a company with products that are almost omnipresent in financial-services institutions.

Larry Tabb, vice president of the Securities and Investment Practice at TowerGroup, says that the only way GSTPA will survive is if it bought by SunGard and then run as a commercial entity. "Too much wind has gone out of the GSTPA sails," he says.

Greifeld disagrees, contending that most of the firms which initially signed on with the GSTPA are still committed to making the venture work.

SunGard is also committed to making its own VMU work. Greifeld says that the technology will be ready before the SEC can grant the CA-1 approval and he expect to begin testing in July. The vendor is focusing on providing its own VMU service to existing customers while also giving them the ability to connect with other VMUs.