Thomson Reuters' Beta to Connect Dealers to DTCC's Alternative Investments Custody, Clearing

Market data vendor Thomson Reuters has announced the debut of its Beta Systems Alternative Investment Products (AIP) solution for end-to-end brokerage processing of certain alternative investments. The platform will be implemented in partnership with the Depository Trust & Clearing Corp. (DTCC), which in March filed a Securities and Exchange Commission (SEC) rule amendment allowing it to provide comprehensive custody and processing of alternative investments through its subsidiary clearing arm, the National Securities Clearing Corporation (NSCC).

Making the DTCC's AIP processing available to all broker-dealers using Beta, the new connection is expected to streamline what was previously an intensive and manual process. It will provide firms quicker access to account position data, tax lot information, and integrated statements with interfaces providing usability for both brokers' back-offices and financial advisors.

"The project was initiated two years ago [well before the rule amendment], when we were approached by a large broker seeing burgeoning client demand for alternative investments access—previously reserved only for the highest net-worth clients, and institutions,” says Eric Jones, global head of Beta product management at Thomson Reuters.

That demand, he says, stems from increasing priority among investors to diversify their portfolios away from products whose changes in value closely correlate with broader equities markets fluctuation. Two years on, that demand has grown only stronger.

The project, according to Jones, initially functioned as an integrative and collaborative effort between five different players: Thomson Reuters and DTCC, the large broker, and two different alternative investment product providers. The group, with the broker serving as a pilot, wanted to test the DTCC's new process—based on a previous mutual funds model—for anomalies using real data, well before the March SEC rule amendment.

“The ultimate objectives are greater efficiency, risk mitigation, and lower operational costs for clients,” Jones says.

The platform, which will presently allow broker-dealers to manage submitted orders for non-traded real estate investment trusts (REITs), business development companies (BDCs), dividends, commissions and settlement processes, will also provide services covering managed futures, funds of funds, and other alternative securities in the near future.

DTCC also sees tremendous potential in the move. "It represents a critical first step in helping investors achieve their alternative investments goals with greater transparency and reduced costs," says Ann Bergin, managing director and general manager of the DTCC’s wealth management services.

Thomson Reuters’ Jones adds that the trend toward collaborations achieving automation within the wealth management space is certain to continue. Managed accounts, he says, represent an additional area already being scrutinized by the vendor.