2012 Top International Operations Executives
2012 TOP INTERNATIONAL OPERATIONS EXECUTIVES:
The More Things Change, The More They Stand Out | DIANA CHAN: Shaking Things Up, In European Clearing | CHRIS REMONDI: Increasing Information, Reducing Risk | NEERAJ SAHAI: Marrying Large-Scale Technology With Boutique Service | KEVIN MILNE: Making an Exchange Succeed By Working With Rivals | THOMAS ZEEB: Gold Standard in Securities Processing | CHRISTOPHER JAYNES: Cutting Out the Custodian Bank | PATRICK COLLE: Going Global, But Not Everywhere | TONY FREEMAN: Targeting Two-Day Settlement
TONY FREEMAN: Targeting Two-Day Settlement
December 20, 2011
Ensuring a two-day settlement cycle for all euro zone markets sounds like a pretty lofty aspiration.
The European Commission says it's necessary to ensure that a new pan European settlement platform created by the European Central Bank can operate efficiently. The future of that initiative called Target2Securities is now in jeopardy as the ECB in October said it had to postpone the launch to 2015.
The announcement made at the annual SWIFT International Business Operations Seminar prompted plenty of industry talk that the project could very well be cancelled. And for good reason. European securities depositories and custodian banks have questioned the merits of T2S; it might not deliver the cost efficiencies promised.
Just how the fate of T2S will effect a shift to a two-day settlement cycle, otherwise known as T+2, is anybody's guess. But for now at least one industry player, Omgeo, appears to be committed to the cause. Taking up the charge is Tony Freeman, director of industry relations for Europe.
His task is pretty daunting. He has to convince fund managers of the merits of changing their antiquated procedures -- and timing for acknowledging trade details. Forget about faxes, phone calls and emails. Nothing short of a standardized automated process will do. If they don't the trade could fails to settle on time.
“We are explaining to buy-side firms the benefits of full automation and are working c loosely with broker-dealers to identify clients that rely on manual processing and generate additional cost and risk,” says Freeman.
Broker-dealers, insists Freeman, are already convinced of the benefits of automation as they are driven by efficiency and the elimination of operational risk. Custodian banks, which serve as middle office outsourcing agents for fund managers, are also highly automated.
The greater the number of fails the higher the operational risks--and costs-- to fund managers, broker-dealers and banks which have to compensate each other and the investor. Those costs don't even account for the time the parties have to spend figuring out what went wrong.
"The EC believes that a two day settlement cycle will reduce short selling so T2S isn't the only reason for the change," explains Freeman.
Freeman has plenty of experience in the fund management industry. At the early age of 18 -- right out of high school – he took a job as the settlements clerk for a U.K. pension fund company. “It was a pretty paper-intensive environment back then," he recalls. His responsibilities included ensuring portfolio managers and custodian banks did their work correctly.
Freeman has also worked as a systems analyst in the IT department at Robert Fleming, a manager for the International Securities Markets Assocation, now Xtrackter, the matching service now owned by Euroclear, and a relationship manager in the securities services unit of the former Chase Manhattan Bank.