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The End of An Era

The GSTPA calls it quits.

Although in my subconscious I always knew it was going to happen, I still can't believe that it has. The Global Straight Through Processing Association has called it quits.

I first started covering STP, and the emerging GSTPA, in 1997. In the beginning, it seemed like the answer to the back-office's woes - creating one centralized utility that would match all cross-border trades (one is the operative word). Looking back, it should have been clear that this matching utopia was a dream headed for disaster.

I remember Sibos of 1998 in Munich where controversy seemed to be brewing already. Financial institutions, having ponied up the initial cash to start building the GSTPA's Transaction Flow Manager, were upset because the RFI process was taking too long. The process had lasted about a year by then, and continued much longer.

At that time, it was a very coveted contract to win. Every vendor wanted a piece of the action, assuming that virtual matching was the wave of the future. The GSTPA had laid out a time line for production, where the TFM was expected to begin its testing phase in the summer of 2000!

I guess the red flag should have been raised when by 2000, GSTPA still didn't even have its vendor consortium chosen, and by 2001, the only progress that had been made was the formation of the mysterious Axion4.

Of course, all of these issues may have been skirted if GSTPA had agreed to some of Thomson's terms back in 1999. Perhaps if they had joined forces, they could have built a single matching utility with greater adoption rates more quickly. Instead, Thomson launched Omgeo, a for-profit entity to compete with GSTPA. Although this shattered the industry's dream of one central-matching utility, the competition also allayed the rising fear that a matching initiative might never come to fruition, considering its pace at the time. Competition, especially from a for-profit entity, was thought to be healthy.

And although Omgeo eventually did pull it off by launching the CTM this year, the big question now is: Does anybody care?

One very frustrated industry source put it in interesting terms. He said in the long time span that the matching utilities have taken to launch, they have outdated themselves.

"Since the time that a VMU was a flicker in the industry's eye, electronic trading has taken off and technology has been vastly improved."

He says, "If you trade electronically, why do you need to reconcile after that? You've already confirmed the trade," explaining that, historically, you reconciled because counter parties were on separate systems or trading by phone.

In addition, standards have improved as well. "The future of matching is pre-trade matching, if you push logic to the limits, you don't need a VMU." My source is not alone (see cover story)

So, the big question looms: Is Omgeo's CTM necessary? Or will this not only be the end of an era for GSTPA but for virtual-matching altogether?

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