The Future of Omgeo Oasys

Post-trade industry utility Omgeo recently celebrated the 20th birthday of its Omgeo Order Allocation System (Oasys), which automates trade allocation processing. Sell-Side Technology spoke with Steve Matthews, newly appointed COO of Omgeo, about the utility’s plans for Oasys, and other initiatives in the works.

At this milestone—the 20th anniversary of Omgeo Oasys—what is the vision for the next five, 10 and 20 years for Omgeo?
Steve Matthews, COO, Omgeo: Omgeo Oasys has played a significant role over the last 20 years, bringing efficiency and standardization to the equities and fixed income allocations processing space in the US. We continue to enhance Oasys to ensure it keeps up with industry trends and regulations, including adding new functionality to support recent regulatory changes around cost-basis information and commission-sharing arrangements. As we look to the future, we have a continued commitment to further automate the post-trade life cycle, strengthen transparency and minimize risk for the financial services community, while enabling traders to focus on their core competencies.

What new initiatives is Omgeo developing?
Matthews: Omgeo develops its offerings in tandem with community needs. More than ever, our clients are looking for automated platforms that increase transparency, accelerate the trade lifecycle, reduce operational risk and ensure regulatory compliance. We are working on a number of initiatives to help clients in each of these areas. For example, data quality remains a priority for Omgeo as more and more clients adopt Omgeo Alert, a web-based global platform for the maintenance and communication of account and market-specific settlement instructions (SSI). Here, we are working very closely with our community to ensure Alert is aligned with market requirements of the Securities Market Practice Group (SMPG), while recommending best practices on how our community can help to keep data both current and compliant. In doing so, the trade lifecycle is accelerated and risk is reduced.

We are also committed to helping our community effectively identify and manage counterparty risk by leveraging Omgeo ProtoColl for collateral management and Omgeo CrossCheck for portfolio reconciliation. In addition, we have worked closely with EuroCCP to build a link between Omgeo CTM, our central matching offering, and EuroCCP, in order to mitigate risks and reduce inefficiencies in the hedge fund/prime broker/executing broker trade processing chain.

How has Oasys developed over the years and how will it continue to develop?
Matthews: Omgeo Oasys transformed the middle office, automating previously manual processes and introducing straight-through processing (STP). Driven by demand from the investment manager community, Omgeo Oasys was a game-changer when it was introduced in 1990, allowing for significant changes such as the move from trade date plus five days (T+5) to T+3 in 1995. Omgeo Oasys continues to mitigate risks and improves the process for all market participants. As the industry's earlier standard for middle-office allocation automation, Omgeo Oasys has served as the first model for other services such as Omgeo Oasys Global and, later, Omgeo CTM.

Will Oasys be retained while Oasys Global is being phased out and how is the retirement of Oasys Global and transition to Omgeo CTM for brokerages progressing?
Matthews: Omgeo is committed to the Oasys community. While our long-term strategy may introduce US allocation flows on Omgeo CTM—although it is currently not on the roadmap and dates have not been established—Omgeo Oasys is the allocation solution for the US market, today and for the foreseeable future.

From an Omgeo CTM perspective, Omgeo began moving its large broker-dealer community from its legacy system Omgeo Oasys Global to Omgeo CTM in 2009 as part of a multi-year program to deliver the value of central matching and increased efficiency to a broader community.

What challenges in the marketplace does Omgeo anticipate?
Matthews: An ongoing challenge that the marketplace is facing is looming regulatory reform. As specific rules are ironed out, industry participants remain unsure of what to expect when planning for the future. Omgeo continues to partner with the industry to help identify ways that automation can promote regulatory compliance. In addition, while there will be a number of challenges such as continued industry re-structuring, we strive to create an environment that promotes operational efficiency. One example is Europe's potential move to a T+2 settlement cycle. In order for firms to embrace an accelerated settlement cycle, trades need to move much more quickly from the front office to the middle and back office and down to settlement. Clients who choose to leverage automated solutions, such as Omgeo CTM, which accelerates the allocation–confirmation process, will be in a much better position to meet aggressive settlement targets.