Trade Matching Causes Integration Headaches for Banks

Computerworld - One of two companies vying to offer automated trade-matching capabilities to the brokerage industry announced last month that 17 Wall Street firms have signed up for its services. But banks that process stock trades will likely end up having to integrate their back-end systems with the networks of both trade-matching providers.
That prospect doesn't sit well with Tom Perna, senior executive vice president of investment services at The Bank of New York Co. "It's absolutely ridiculous that we're essentially having to do the work twice," he said.
For users like Bank of New York, such integration projects are expected to require millions of dollars and thousands of man-hours. "Relative to Y2k, it's not as big, but it is a sizable undertaking," Perna said.
Bank of New York is one of five so-called custodial banks that signed up two weeks ago to use the trade-matching services of Boston-based Omgeo LLC. The banks work with brokerages to authorize the release of funds that are used to cover stock trades as they are finalized - a process that can take several days.
Picking Up the Pace
As part of an effort to speed up that process, rival services are offering to let brokerages, banks and clearinghouses match data about trades via IP-based virtual private networks linked to back-end mainframes.
Omgeo, which is jointly owned by Depository Trust & Clearing Corp. in New York and Thomson Financial in Boston, competes with the Global Straight Through Processing Association (GSTPA) in Zurich.
While the Securities and Exchange Commission is forcing Omgeo and the GSTPA to set up portals for sharing information, Perna and others in the financial services industry said they would rather see the two services combine to set up a single matching engine. "What started out as an absolutely great idea with the GSTPA has turned into a cross-border political nightmare," Perna said.
Bank of New York has already begun work on connecting its processing systems to Omgeo's matching engine and expects to complete the integration this year, he added.
Gary Foster, chief technology officer at Omgeo, said the integration process takes a matter of months in most cases. Even a brokerage or bank with highly automated back-end systems has to use Omgeo's application programming interfaces and messaging specifications, he noted.