Wall Street & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Trading Technology

00:00 AM
Andrew Rafalaf
Andrew Rafalaf
Connect Directly

DTCC and ESG, Former Foes, to Create New Post-Trade Processing Entity

Long-time rivals could create serious competition for the GSTPA.

In a wild turn of events, the DTCC and Thomson Financial ESG, long-time rivals, have joined forces to create a new for-profit entity that will streamline and standardize post-trade processing globally. Although the two organizations offer seemingly competitive products, the two now claim they have come to realize that they are far more complementary in nature. This move follows years of fighting, with the DTC, now a division of the DTCC, trying to offer its electronic trade confirmation services internationally, while Thomson attempted to offer its Oasys Global product in the U.S. Although the actual composition of the new organization, and what services it may avail has yet to be determined, DTCC and ESG bring together thousands of clients from around the world, and creates a serious competitor to the GSTPA.

"When we sat down with Thomson, what we found was a surprising set of complementary assets," explains Robert McGrail, managing director and head of new business ventures at DTCC. "And, one of the assets that Thomson does bring is a global presence in 38 other countries."

Howard Edelstein, president and ceo of ESG agrees, adding that the two groups realized that by enjoining some of their services could, in fact, fill gaps that exist in the current post-trade processing environment. "Gaps such as how do you get your allocations to a customer, and gaps like how do you get your confirmations back," Edelstein clarifies. "There are all these different processes for different clients that we think we can standardize around the world."

Technical committees, with representatives from both organizations, just began ironing out the details of what this new technological messaging infrastructure might look like. Edelstein explains that the company will take two separate tracks: one will provide ways to enhance the trade processing technology that clients currently use, and the other will focus on the infrastructure of the future.

"We think there are some short-term gains that can be gotten on existing technology that would not require major re-writes," he details.

McGrail adds, "We want our collective thousands upon thousands of customers to be able to transition to these new platforms while maintaining the current investment they have made. We want a smooth migration path. We want to make it evolutionary for them."

Because the two organizations have only pounded out a preliminary business plan -- with the aid of Bear Sterns and DB Alex. Brown -- Edelstein and McGrail are reticent to set any sort of timetable on the release of new products. The two did say that the technology would be open and neutral, able to connect with any front-end systems and other providers of back-office processing functions, including the GSTPA.

"Our goal is to build a pier-to-pier relationship with the GSTPA such that our thousands upon thousands of customers can interface with their customers, once they get them," says McGrail.

Edelstein, who has long sought out a compromise with the GSTPA to integrate some of ESG's existing technology, says he is still open to discussions. "Clearly, it is going to be the GSTPA's decision of how receptive they're going to be," says Edelstein. "We are predicating ourselves on an interoperable environment. Should the GSTPA be interested in doing that, we're be more than interested in chatting with them."

McGrail claims that the two companies are not committing any specific amount of money to the new company, but rather leveraging the existing business resources of both DTCC and ESG. "It really doesn't involve an infusion of cash," he says. "Both of these businesses are profitable businesses. These are two viable businesses that we're putting together."

For eligible wordsmiths, Edelstein invites anyone to submit a possible name for the new entity. "I've made the offer, anybody who can choose the winning name gets a Ferrari," he quips.

Register for Wall Street & Technology Newsletters
Exclusive: Inside the GETCO Execution Services Trading Floor
Exclusive: Inside the GETCO Execution Services Trading Floor
Advanced Trading takes you on an exclusive tour of the New York trading floor of GETCO Execution Services, the solutions arm of GETCO.