A DTCC Thomson Reuters Company

BDUG Panel DiscussionOmgeo & DTCC

Driving Same Day Affirmation Rates: Positioning for Settlement Matching &Shortened Settlement Cycles

A DTCC Thomson Reuters Company2

Driven by SIFMA Objectives

Support for Industry Initiatives

Offer Economic Incentives

Provide Analysis Tools

Engage ClientsSDA Rates

Eliminate reclaims Shorten settlement cycles Increase affirmation rates

Settlement Matching BCG & DTCC study SDA & Central Matching

Affirmation incentives Best practice price

alignment

Voice of client SDA analytics Billing & usage

Prime Brokers Custodians Brokers Institutions

Industry Campaign to Drive “Trade Date Matching”Multi-pronged effort leveraging pricing, new tools & consultation

Omgeo’s multi-year plan

to raise SDA rates and

lower costs

A DTCC Thomson Reuters Company3

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($)

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($)

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($)

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($)

($)

11%

6%

1%

51%

19%

5%

38%

75%

94%

SDA: Alignment with Industry Best PracticesIncenting Same Day Affirmations (SDA) & Central Matching

Custodian

InvestmentManager Broker

Omgeo Community

TradeSuite ID

OTM & CTM

Post

-Exe

cuti

on

Pre

-Sett

lem

en

tS

ett

lem

en

t

PDQ SETTLEMENT

DTCC

TT+1,2

T

T+1,2

T+3+

T T+1,2 T+3+

($incentive/transaction)

Supporting industry initiatives tofacilitate settlement finality & shorten settlement cycles –

SDA & Central Matching recognized as key building blocks to achieving industry goals

.

CTM/Central Match Workflow

OTM/Central Match Workflow

Confirm Affirm Workflow

Performance %*%

Omgeo Pricing Incentive**($)

*Omgeo Internal Data June 2012 (US) **Per billed transaction

Omgeo’s Affirmation Incentive Program Driving Higher SDA

Effective Date for Omgeo’s Affirmation Incentive Program04 05 06 07 08 09 10 11 12 13

0%5%

10%15%20%25%30%35%40%45%50%

48%

Omgeo Confidential

T+3+

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TradeSuite ID PRICE CHANGESBased on 2012 & 2013 Approved Price Changes (Affirmed Transactions Only)

Workflow(Standard Aggregated

Transaction Costs)Vol

PriceReductions

w/ SDADiscount

w/TierDiscount

Client Impact

Confirm/Affirm 24% 18% 26% 34% Broker & Custodian

Prime Broker 24% 20% 34% 43% Prime Broker

Broker Custody (SMA) 29% 30% 30% 40% Broker & Custodian

Oasys Trade Match* 17% 38%* 43% 48% Broker & Custodian

Same Day Affirmations Provide Higher ValueImplementing price reductions & incentives

6% Miscellaneous: Other DTCC Ineligible Confirms (Fed, Foreign, etc.)

* Auto-Affirm Transactions Only

OMGEO & DTCC Transaction Cost MatrixBased on 2012 & 2013 Approved Price Changes

Reclaim Rates

AffirmedAffirmed/Exempted

Unaffirmed

0.2% Reclaim Rate 1.7% Reclaim Rate 5.0% Reclaim Rate

Omgeo Transaction Workflow

Confirm/AffirmSDA

OASYS TradeMatch

SDA

Confirm/Affirm

T+2

OASYS TradeMatch

T+2

Confirm/Affirm

OASYS TradeMatch

Confirm/Affirm

OASYS TradeMatch

DTCC Settlement Service

PDQ PDQ PDQ PDQ DO DO NDO NDO

Combined Cost Differential

0% 0% +4% +8% +114% +116% +32% +72%

Omgeo Confidential

A DTCC Thomson Reuters Company55

Affirmations controlled by Prime Broker Highly concentrated target group Highly automated processes Precedent set for high SDA rates

Affirmations automated by TradeMatch, in most cases “Auto Affirm” transactions yield highest SDA rates “Match-only” configuration inhibitor to SDA rates Allocation and Broker input timing a factor

Affirmation rates influenced by Custodian Very broad client segment Perception affirmations cost more IMs not receiving confirms (manual processes, global clients, etc.)

Prime

Broker

Prime

Broker

Confirm

Affirm

Confirm

Affirm

OTM

Central Match

OTM

Central Match

SDA Analysis: Key Omgeo Target SegmentsFocus on the “Affirming Parties” (Institutions & Agents)

24% of Total Vol

37% of DTCC Vol

24% of Total Vol

37% of DTCC Vol

17% of Total Vol

26% of DTCC Vol

Omgeo Confidential

A DTCC Thomson Reuters Company6

100% 74%* 26%

SDA Analysis: Workflow BreakdownConfirm Affirm vs. Central Match (OTM)

DTCC Eligible Volume

Total Confirm Affirm OTM0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

* Includes Prime Broker Volumes

Note: Based on August data

Broker Input Rate on T

Affi

rmat

ion

Rat

es

SDA Rate

T+2 Rate

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1 2 3 4 5 6 7 8

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

SDA Analysis: Prime Broker Low SDA rates, high T+2 rates

Top Volume Prime Brokers(Performing Role of Institution & Agent)

SDA Industry Ave

T+2 Industry Ave

In Random Order

Affi

rmat

ion

Rat

es

Above Average SDA Rate

Below Average SDA Rate

Above Average T+2 Rate

Below Average T+2 Rate

A DTCC Thomson Reuters Company8

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

SDA Analysis: Agent BanksAbove average SDA, low T+2 rates

1 2 3 4 5 6 7 8 9 10

SDA Industry Ave

T+2 Industry Ave

In Random Order

Top 10 Volume Agent Banks(Combined Confirm Affirm & OTM Workflows)

Affi

rmat

ion

Rat

es

Above Average SDA Rate

Below Average SDA Rate

Above Average T+2 Rate

Below Average T+2 Rate

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0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

1 2 3 4 5 6 7 8 9 100.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

1 2 3 4 5 6 7 8 9 10

Top 10 Volume OTM Institutions(Central Match Workflow)

Top 10 Volume Confirm Affirm Institutions(Agent Affirming as Institution or on Behalf of Institution))

SDA Analysis: InstitutionsCentral Match driving higher affirmation rates

SDA Industry Ave

T+2 Industry Ave

SDA Industry Ave

T+2 Industry Ave

Affi

rmat

ion

Rat

esA

ffirm

atio

n R

ates

Above Average SDA Rate

Below Average SDA Rate

Above Average T+2 Rate

Below Average T+2 RateIn Random Order

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SDA Analysis: Increasing SDA in Short Term Initial findings and recommendations

Prime Brokers

OTM Institutions

Confirm Affirm

3 of top 8 have 89%+ SDA rate - 4 are below average w/high T+1 Move affirmation timings from early T+1 to late on T Target 5 high volume clients to achieve above average rates

Exhibits lowest SDA rates, especially “Agent as Institution”, “Agent affirming party”

Work with Custodians to explore inefficiencies Make recommendations and target potential savings Target high volume clients to achieve above average rates

Auto Affirm” yield highest SDA but anomalies exist “Match Only” clients yield lowest SDA

Move “Match Only” to “Auto Affirm” & investigate anomalies Work with Brokers & Custodians to explore inefficiencies Target low SDA clients to achieve above average SDA rate

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May June July0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

OTM Institutions

Confirm Affirm Institutions

Prime Broker

Current

17% Increase

Potential SDA ImprovementsTargeting select Prime Broker, Custodians & Institutions

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Guide for Omgeo SDA reviews & client consultation process Identify weaknesses Make recommendations

Flexible ongoing client analysis tool Affirmation rates and performance Operating efficiencies Counterparty efficiencies & performance

Determine institutional set-ups & workflows Workflows (i.e. Confirm/Affirm vs. OTM) Matching processes, (i,e, “Auto Affirm” or “Match only”) Affirming party (who did the Affirmation?, Agent or Institution?) Identify client internal accounts (AIA, BIA, etc.)

Evaluate PDQ settlement rates Breakdown of delivers vs receives Identify exemption rates

Clarify TradeSuite ID invoices Transaction volumes by workflow category, asset class, client type, etc. Bill types, affirmation discounts, etc.

Introducing New Data Service in 2014“Omgeo SDA Analytics”

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Cost

Reduction

Settlement Matching

Efficiencies

SSC

Preparedness

SDA MISSION: Benefits to the IndustryEye on US market readiness

Omgeo transaction costs Operational costs – middle and back office Fails and related financing costs Cost benefit from SSC (BCG Study)

Supports settlement finality via “Passive Matching” Reduces risk of reclaims Reduces fails & settlement risk Enables operating efficiencies – middle & back offices

Meets requirement for T+1 settlement Reduces systemic market risks Enables more streamlined STP Reduces credit risk

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Thank youGregory.johnston@omgeo.com