Canada Making Preparations for Same-Day Matching
February 2, 2009
As the deadline for Canada's same-day matching mandate draws nearer, front- and back-office systems providers are capitalizing on the opportunity.
For example, CanDeal, a trading platform for Canadian debt securities, and Charles River Development, a provider of compliance technology and order management systems (OMS), on Jan. 22 called attention to integration they say will help mutual clients meet Canada's National Instrument (NI) 24-101. Burlington, Mass.-based Charles River is a major player in the Canadian OMS market; CanDeal, co-owned by six Canadian broker-dealers and TMX Group, offers a request-for-quote marketplace. Canadian debt transactions generally settle within three days of a trade (T+3).
Though historically it has lagged the U.S. market in straight-through processing (STP) initiatives, Canada is the only country to move to adopt same-day matching between fund managers and broker-dealers for all trades. In April, the Canadian Securities Administrators (CSA), an umbrella group for the country's regulatory bodies, ruled that firms must match 70 percent of their trades on T+0 by July 2010, 80 percent by January 2011 and 95 percent by the following year.
The current timetable is the fourth since the CSA floated the idea of same-day matching in 2004. When it was issued in January 2007, NI 24-101 required that 95 percent of applicable trades be matched on trade date by 2010. After extending the deadline last year, the CSA indicated it could push it back further if necessary. Representatives from a cross-section of hedge funds, brokers and custodian banks--working under the auspices of the CSA--met Jan. 28 in Toronto to discuss how far the market has progressed.
"As a result of same-day matching, fund managers will realize they need to increase operational efficiencies from the beginning of the trade process," said Robert Smythe, VP of research for Toronto-based Stratix Consultancy. To meet the new requirement, the buy side will need to adopt automated, real-time systems so that allocations can be communicated to broker-dealers and custodians far earlier in the day than manual processing allows.
The link between CanDeal and Charles River, which launched in 2005, allows for notice of execution, location, instruction, matching, affirmation and settlement to occur within seconds of a trade. Seven-year-old CanDeal, which also connects to Bloomberg's OMS and proprietary platforms, is looking into linking with MacGregor, an OMS vendor subsidiary of Investment Technology Group.
"Since the introduction of NI 24-101, same-day affirmation of trade results has been more important than ever for our Canadian clients," noted Stephen Engdahl, director of product development for Charles River. "The integration eliminates the need for mutual clients to rekey data from one platform to the other." About ten of Charles River's 28 customers in Canada are sending orders to CanDeal through its OMS, which Engdahl said has been gaining traction over the past few months as buy-side firms implement more sophisticated systems.
Trades initiated at CanDeal can be affirmed via Charles River, according to Phil Wright, managing director of CanDeal. Alternately, OMS users can forward trades to CanDeal for execution, explained Wright, and "CanDeal then provides Charles River with a notice of execution to affirm the trade."
Matching Utilities
Competition among providers of central matching utilities has also been heating up. Although their use is not being required by the CSA, both Omgeo's Central Trade Manager (CTM) and SS&C Technologies' SSCNet have seen increased interest.
