SS&C Gets SEC Approval for E-confirmations
September 22, 2008
SS&C Technologies has received a no-action letter from the Securities and Exchange Commission that allows broker-dealer customers of its post-trade communications service to eliminate paper-based disclosures associated with trade confirmations.
The letter, issued Aug. 13 and announced earlier this month, puts the Windsor, Conn.-based front- to back-office software provider on a level playing field with Omgeo, SunGard Data Systems and Tradeweb. In April, Omgeo won similar approval for its TradeSuite platform, as did SunGard Institutional Brokerage for its SunGard Transaction Network in July 2007. Multi-asset-class trading platform operator Tradeweb received a no-action letter in 2003.
Until now, SS&C, which has long offered electronic confirmations for Canadian securities, had not met Rule 10b-10 requirements that would allow it to do so for U.S. stocks. That rule mandates that brokers provide key details in writing before a transaction can be considered legally binding. Currently, broker-dealer clients must opt out of paper-based communications to receive electronic confirmations.
"The completion of the 10b-10 no-action letter will allow the marketplace to realize considerable cost savings when providing electronic confirmations," said Alex Marasco, SVP of the SSCNet service that SS&C inherited through its 2005 acquisition of Toronto-based Financial Models Co. (FMC).
Although SSCNet, formerly known as FMCNet, has a strong following among Canadian investment managers, it has faced an uphill battle to win market share in the U.S., where it has not received the green light from the SEC to offer central matching services akin to Omgeo's. The former FMC filed the paperwork in 2005 but was forced to redo its application when it was acquired, said an SS&C official who declined to speculate on when the SEC would reach a decision.
Even though SSCNet links to Omgeo's TradeSuite, allowing it to receive confirmations from U.S. brokerages, less than 10 percent of SSCNet volume is from U.S. securities, according to SS&C. Were it to receive approval, SSCNet could connect directly to the Depository Trust & Clearing Corp.'s settlement service-and eventually Omgeo's central trade matching service-likely boosting its U.S. volumes. Boston- and New York-based Omgeo declined to comment for this article.
With the no-action letter, SS&C's U.S. trade confirmation service may allow it to more easily market other products such as its portfolio management systems, Camra and Pacer. While Camra targets the institutional pension fund and insurance industries, Pacer, a former FMC platform, specializes in independent asset managers. SS&C does not break out the number of clients by product line.
"We are operating from a position of strength in the cross-border arena and are looking to expand our reach in the hedge fund, prime brokerage and separately managed accounts markets," said Marasco.
As it eyes the U.S., SS&C is beginning to face competition in Canada. In December, Omgeo announced that Toronto-based fund manager Mackenzie Financial Corp. had begun sending trades matched on its Central Trade Manager directly to Canada's central securities depository (CSD), making it the first central matching service operational in the country. SS&C says that SSCNet also connects to the CSD, but no fund managers are using the link, which the company attributes to a lack of preparedness on the part of buy-side firms who are concentrating on matching services.
