INSIDE THIS ISSUE Consolidating reconciliations through BPO

Focus on Americas TLM® Corona – customer self-service

The web 2.0 advantage Reconciliations – moving up the lifecycle

ISSUE 10 2008
NewsMatch
SmartStream Technologies’ Magazine for the Financial Services Community

Proactive Cash Management delivered by TLM

®

Trade Process Management – supporting

post-trade processing of complex instruments

The growth of OTC Derivatives

in the middle and back office

Streamlining payment exceptions

with SWIFTNet E&I

Take
Control
with Transaction Lifecycle Management ®
 2

Welcome to NewsMatch | CEO Comment

The back-office systems of the world's a broad suite of Transaction Lifecycle

largest investment banks are at breaking Management solutions that enable many
point from escalating trading volumes… of the world’s largest financial institutions
Trading volumes on Friday, Aug. 10, were to automate critical processes across
so high that at least two top investment their enterprise.
banks’ credit derivatives teams had to work
over the weekend to clear confirmations. SmartStream has a new owner to further
One banker said it was lucky the spike this vision, DIFC Investments, the
Ken Archer
Chief Executive Officer,
happened on a Friday, giving his team two investment arm of the Dubai International
SmartStream days to catch up, or they would not have Financial Centre (DIFC) that has bought
been able to open for business on Monday. the company from TA Associates. For our
Financial News (Aug 20, 2007) customers and partners it is business as
usual in the short term, as we work with
The recent credit and liquidity crisis has In autumn 2006 SmartStream sponsored them to develop, deliver and expand our
had implications across the global financial a Celent research study into ‘The Barriers TLM solution portfolio.
markets and highlighted critical weaknesses to STP’ that revealed that while Straight
in middle and back office operations. Through Processing had been embraced However the investment will have a major
The front office investment in algorithmic as a concept actual practice showed a lack impact over the medium and long term,
trading and the introduction of increasingly of commitment. It also highlighted that, helping SmartStream to further accelerate
complex instruments has resulted in compared to upstream investments, Banks product and solution development for new
processing bottlenecks. As transaction and Asset Management firms were not and existing clients. It places the company
volumes have surged, in the case of OTC allocating sufficient time and attention to at the heart of the DIFC’s plans to create a
derivatives growing as much as 80% year on Back and Middle Office STP initiatives. secure and scalable trade processing hub.
year, scaling operations to process these It’s clear this lack of investment is now
volumes has proved a significant challenge. proving problematic for institutions. Our global capability has transformed as
However, when these volume increases are we’ve opened offices around the world to
further impacted by market events such as At SmartStream we’ve been helping many service our customers and address new
the liquidity issue the consequences can of the world’s leading financial institutions geographic markets. In the last few months
be crippling… build highly flexible, volume insensitive, alone we’ve been expanding offices across
transaction processing environments since the UK, US and Singapore and opening
the company’s inception in 2000. Today we new premises in China. This will continue
have transformed our business to deliver under the DIFC’s ownership, delivering a

Eliminating the barriers to Straight Through Processing

through the delivery of enterprise-wide, real-time
Transaction Lifecycle Management solutions

2 Welcome to NewsMatch 7 Industry Research 10 Executive Viewpoint

CEO comment Banks warn regulatory pressures and Creating a reconciliations community

Type here
costs set to impact product innovation
4 Global News 12 Trade Process Management
Company news round-up 8 Focus on Americas Supporting post-trade processing of
Building on our strengths complex instruments
6 Product Focus
Proactive Cash Management 9 TCS Aspire Service 14 OTC Derivatives
delivered by TLM Consolidating reconciliations through BPO The derivatives conundrum
 NewsMatch 3

direct route to the rapidly expanding real-time, multi-instrument, enterprise-wide markets and to enter new geographies we
Middle Eastern market and offers exciting trade processing environments for are expanding our indirect operations by
opportunities to deliver TLM solutions to the Middle Office with TLM Trade building relationships with trusted third
new and strategically important markets Process Management. parties. Our commitment to serve our
and client that we share. global client base with the highest level
Beyond product innovation we’re focused of service has never been stronger.
The many achievements the company has on strengthening our business through
made to date have created a tremendous operational excellence and greater client It’s through these continued investments
platform to expand from and better serve intimacy – in doing so we believe we can and with our clear and compelling
our global client base as their transaction be a better strategic partner to our clients. technology vision that I believe we have
processing requirements evolve. The DIFC Operationally, we’re improving our already become a strategic partner to our clients.
investment is further evidence that our robust product development processes to The news stories and features in this edition
strategy is in tune with market needs to ensure the quality of products and our new of NewsMatch highlight just how far the
deliver efficiency, visibility and control to composite, SOA-based, solutions remain at company has come over the last 12 months.
back and middle office process. the highest level. We’re introducing new I’d encourage you to take a look at the
processes to capture market feedback on a magazine and see how we can help you
SmartStream has invested heavily in its more frequent basis to identify common strengthen your operations.
suite of Transaction Lifecycle Management processing challenges from our global
products and established a Services Oriented customer base of more than 1,000 clients. In
Architecture (SOA) approach that enables us this way we can help customers respond faster
to rapidly respond to clients needs. New to their most critical processing challenges.
solutions can simply be configured from our
existing products to address emerging market SmartStream is also increasing headcount
and regulatory challenges. The flexibility of across our operations and investing further
this architectural strategy enables us to in employee training to ensure our people
address common industry issues as well as are in the best possible position to rapidly
meet individual client requests, addressing respond to client needs. Account management
specific transaction processing pain points. is another focus for the company; we’re
A good example of the way in which we’re building teams and strengthening processes
able to respond to common operational across each of our regions to ensure we
challenges, like the sub-prime issue, is the make ourselves easier to do business with.
way in which we’re helping companies create To provide greater capacity to our existing

Take
Cash Management
Compliance Management
Corporate Actions
Control
with Transaction Lifecycle Management ®

Exception Management
Reconciliations
Trade Finance
Trade Process Management

16 Customer self-service 22 STP in Latin America 28 Cash Management

Case Study – RZB Moving towards standardisation and Maximise funding and lending

Type here
greater efficiencies opportunities through enterprise-wide,
18 Reconciliations real-time cash management
Case Study – Northern Trust 24 Reconciliations
Case Study – ING IM Australia 30 TLM Corona
®

20 Web 2.0 TLM Corona goes from strength to strength

Set to transform customer services 26 SWIFTNet E&I
Streamlining payment exceptions
4

Delivering exception
ING IM gain visible results management at
from automated processes Commerzbank

ING Investment Management (ING IM) in Australia is

using TLM® Reconciliations to manage the reconciliation By extending its Corona implementation,
control requirements of around 1,000 portfolios with a Commerzbank aims to enhance
value of approximately AU$40 billion. Exception Management through rapid
investigations processing of historic
This has enabled it to move away from in a ‘semi-automated’ environment using Excel transaction data. Using Corona Archive,
spreadsheets, Access databases and other desktop tools to create automated, timelier the data can be maintained online
reconciliations processes. As a result, ING IM has gained greater visibility of the resulting without any limitations in systems
reconciliation items, a key element to reducing risk. Turn to page 22 for full case study. performance for reconciliation processes.

“The return on our investment is compelling.

Corona’s ability to provide users with rapid
SmartStream gains SWIFTReady Gold access to historic transaction data will
allow us to further automate investigation
SmartStream has achieved the highest level of handling and ultimately improve STP
certification awarded by SWIFT for their solutions, rates,” commented Karin Brehm, Assistant
recognising Corona, TLM Corona, TLM Reconciliations and TLM Trade Finance’s Vice President, on the purchase of Corona
SWIFT compliance, integration with the SWIFT environment and its contribution to Archive. “Corona Archive will facilitate
facilitating greater STP. The accreditation also proves the continued commitment and our investigations process across different
investment into SmartStream’s world leading Reconciliations solution. Commenting on instruments and assist in regulatory
the TLM Reconciliations accreditation Joel Luvigsen, Head of Partner Solutions, SWIFT compliance. We are planning to keep historic
said, “We are delighted that SmartStream continues to work with SWIFT to drive the data of the last 10 years in the system for
market forward for the benefit of our mutual customers. TLM Reconciliations is yet online retrieval.”
another example of SmartStream continuing to offer a standards-based approach to
automating reconciliations processes to reduce risk and cost. The SWIFTReady Gold
accreditation now gives institutions even greater assurances that TLM Reconciliations
adheres to specific SWIFT criteria to deliver a complete, integrated business solution.” WebConnect enables
rapid deployment
New website – now with mySmartStream
SmartStream has re-designed its website to make
it easier for you to find the information you Banco Popolare, implemented TLM Corona,
want. You will find better navigation, a robust to automatically match all relevant
search facility and more content on our range transaction data for Italian and foreign
of Transaction Lifecycle Management (TLM) accounts. TLM Corona highlights exceptions
products and solutions. By registering yourself as early as possible in the transaction lifecycle
on the website you’ll have access to ‘mySmartStream’ and provides the bank with a complete
which will save you re-registering in order to audit trail of its transactions for compliance
register for events, you will be able to browse purposes. The solution’s web-based user
and download the latest brochures, case studies interface, TLM WebConnect, has enabled
or research papers time after time. the bank to quickly and easily deploy
Simply visit: www.smartstream-stp.com TLM Corona across its operations.

Global News
 NewsMatch 5

US buy-side firms Bank of Scotland (Ireland) extends

select TLM TLM to loans and mortgages
SmartStream’s TLM delivers the ability
for buy-side firms to automate and control
transactions across the middle and back
office from the reconciliations department
to the corporate actions function. A major
New York hedge fund, ranked in the Top Bank of Scotland (Ireland), a long standing SmartStream client, has extended
10 globally by asset size, has selected TLM its use of TLM to automate payments for its home loans and mortgages division.
Corporate Actions to automate the firm’s As a result, the bank can eliminate paperwork and reduce the re-keying of data,
end-to-end event lifecycle. This will enabling it to minimise the potential opportunity for human error.
enable the fund to cleanse external data
and prime broker feeds to create the Sean Moore, Business Project Manager, Bank of Scotland (Ireland), explained:
Golden Record for all events, including “The initial TLM implementation enabled us to build an automated, volume insensitive
voluntary response tracking and then process that can easily be extended as we expand our operations. By automating our
calculating and applying entitlements. payments and receipts processes, we have been able to further reduce risk whilst
delivering the highest level of customer service. Extending the service to our home loans
On the West Coast, a leading asset and mortgage divisions is a natural progression which has been made very simple by
manager with more than $100 billion in TLM’s scalability.”
assets under management will deploy
TLM Reconciliations to help manage its
increasingly diverse portfolio, by increasing
control and visibility in the transaction Banco Santander UBS extends
lifecycle through more efficient reconciliation
and exception management processes.
live on TLM investment with
SmartStream
Banco Santander has implemented TLM
Reconciliations to support the group’s
AMVESCAP selects reconciliation consolidation strategy and
SmartStream as Global to better respond to current and future The Investment Bank is expanding its
Reconciliations Platform market and regulatory challenges. The use of TLM Reconciliations to implement
implementation is based on a centralised a solution to cope with more complex
AMVESCAP is one of the world’s largest shared service to include reconciliations reconciliations and replace its existing
independent investment managers with capabilities for cash, securities, and FX securities reconciliation system. TLM
approximately $480 billion in assets under confirmations, as well as intersystems WebConnect, SmartStream’s web portal,
management and the parent for the AIM, reconciliation, and reconciliation of is being deployed across the firm’s global
INVESCO, AIM Trimark, Invesco Perpetual, complex treasury products such as SWAPS user community to provide greater
Atlantic Trust, PowerShares and WL Ross and OTC Derivatives. Luis Corbolan, operational visibility for users through its
brands. By selecting TLM Reconciliations. Director of Reconciliation Operations, intuitive dashboards. Commenting,
AMVESCAP will create a single Santander, commented: “TLM Reconciliations Richard Cummings, Regional Director,
reconciliations and exceptions management has provided us with the flexibility and SmartStream UK, stated “We have been
capability in line with its overall goal of scalability we needed to build a common a trusted supplier to UBS for a number of
continuing to leverage and optimise its reconciliation platform for the group. years, successfully deploying TLM across
global operating platform. Its global By creating an agnostic reconciliations their global operations. We are delighted
operating platform aims to consolidate and processing capability we are able to handle that the Investment Bank has decided to
significantly reduce the overall number of complex transactions like OTC derivatives expand its use of TLM Reconciliations to
suppliers for all major applications. as well as more standard instruments.” gain a further return on its investment.”
6

Proactive Cash Management

delivered by TLM ®

Recognising industry demands for greater visibility and control, TLM Cash Management Unlike traditional solutions, TLM Cash
2.0 enables banks to effectively manage, monitor and forecast cash flows based on Management 2.0 combines centralised cash
real-time rather than projected balances. It is designed to capture transaction data from management with intra-day reconciliation
any source, facilitating the calculation and projection of funding, borrowing and lending enabling banks to build cash ladders for
requirements on an enterprise-wide basis. forecasting daily cash flows accurately.
Banks can initiate realignments / account
Equally applicable to corporate and sweeping before cash deadlines, reducing
internal cash management, TLM enables liquidity risk and managing balances and
banks to leverage real-time information exposures across accounts and currencies.
and implement proactive cash management
practices that eliminate the costs of Providing intra-day positions for corporate
incurring unnecessary settlement and customers is the first step in enabling the
operational risk exposure in the market. corporate to manage their positions more
accurately thus enabling them to reinvest any
TLM Cash Management 2.0 harnesses excess liquidity. Further, providing forecasting
TLM Control, SmartStream’s BPM suite, to functionality extends the corporate
deliver a highly flexible cash management are optimally exploited and risk is customer’s cash management capability.
solution that can be tailored to client- effectively managed intra-day rather than
specific environments. Organisations can end of day or over the following days. It supports institutions managing multiple
simply define business processes in terms corporate accounts to show balances across
of workflow, rules, messaging and Improved visibility into cash exposure for all accounts, geographies, or currencies
notification, data interfaces in and out, and future value dates provides treasuries with and analyse this data in a number of ways.
model them, ensuring a faster time to benefit. the information required to manage their Further, the integration with TLM
liquidity better. This potentially reduces WebConnect can deliver a self-service
Using TLM, cash managers can monitor their costs by allowing the bank to operate element enabling corporates to view
different cash status levels within the with more efficient liquidity ratios and account movements via a secure browser.
nostro, enabling the probability of make better use of collateral and resources.
settlement failure to be determined and the In an environment where SEPA is placing
risk of potential loss resulting from the This visibility aims to deliver a holistic increased pressure on cash management
incorrect positioning of currency balances overview of all of the relevant information operations, TLM Cash Management 2.0
to be reduced. This reduces the cost of with drill down capabilities to access drives operational efficiency to both
covering overdrafts by ensuring responsible granular detail on multiple operational improve nostro operations and service
parties are aware of funding requirements processes. Balances can be aggregated by corporates more effectively through the
as they occur, enabling them to act faster any means – balance, currency balance, provision of accurate forecasting.
and manage balances more efficiently. legal entity, geographic region, line of
business – and users can view equivalent
Additionally, by reconciling real time balances in any currency. A cash manager
nostro account balances and movements can also view opportunity costs and
against internal trading systems ensuring calculations against account balances to
all investment and lending opportunities highlight any revenue opportunities.

Product Focus
 NewsMatch 7

Banks warn regulatory

pressures and costs set to
impact product innovation

$16 billion. That’s the estimated investment 75 percent of European banks rely on forecasting and optimal liquidity
in SEPA compliance since 2002. According primarily manual cash management management. 21 percent and 41 percent
to research findings from Aite Group, processes to consolidate cash balances and respectively plan to offer these capabilities
more than half of the respondents to make forecasts. over the next 24 months.
European cash management survey said
that the regulatory environment was their It also reveals that multiple teams use as Technology will play a vital role in delivering
biggest challenge, consuming so many many as 10 internal systems, often siloed by this vision, as banks look to create the
resources and budget that it is diverting geographic region, for cash management, liquidity management tools and real-time
attention from product innovation and making an enterprise-wide view of cash data customers demand. European banks
other strategic initiatives. and liquidity almost impossible. are moving away from in-house solutions
and, say Aite, are more open to vendor
However, while 60 percent rated technology The changing nature of the corporate solutions due to greater product
as “very important” or “extremely important” treasurer is now the driving force behind standardisation and the desire for greater
to overall success that view is at odds with banks examining the solutions and speed to market.
operational reality, with a continued services they offer. While the role has
reliance on manual processes and Excel evolved dramatically, with a greater The ability to consolidate siloed solutions
for cash forecasting in the majority of emphasis on analysis and strategy, the tools and data into a single automated, enterprise
banks. Without accurate views, corporate used to support it have not. Receivables, solution will deliver the global view across
customers cannot optimise their use of cash payables and cash forecasting can no currencies, accounts and legal entities
and use excess liquidity for investments. longer rely on point solutions and manual needed to effectively manage liquidity and
processes that introduce unnecessary risk avoid unnecessary borrowing and risk.
A similar picture emerged for internal to the process and lack the forecasting It can enable banks to better understand
cash management, where the quality and capabilities demanded by sophisticated customer needs, serve them more cost
timeliness of data used to make decisions corporate customers. effectively and support differentiation,
is often diminished due to siloed process, while delivering visibility and control to
multiple systems and a dependence Many banks lack the necessary drill-down their operations.
on Excel spreadsheets. Aite estimates that capabilities for more advanced analysis,

Industry Research
8

Building on our strengths

The current market issues have served to highlight,
once again, that with new instruments and new
trading infrastructures the need for efficient back Lou Longhi
office operations is greater than ever. Regional Director Americas,
SmartStream

SmartStream’s expertise in delivering in São Paolo, SmartStream has opened

greater automation, integration and control an office based in Miami to serve the region.
is reflected in the breadth and depth of We are already working with numerous
US client engagement projects. We continue Latin American clients that are looking to
to work with leading investment banks gain a competitive advantage through
to help them manage surging volumes differentiation. This dedicated office will
across all instruments. We are also helping enable us to be closer to these clients
a leading outsource service provider and the region. Banco de Bogotá, as you
to reconcile cheque images to meet its can read about in this issue, is using the
customers’ needs in the Check21 world. Spanish language version of Corona to
deliver greater automation in the back
SmartStream continues to support its On the buy-side, leading hedge funds office – supporting its vision for higher
existing customers and new clients in have purchased or gone live this year on STP rates and greater transaction visibility.
the Americas region by delivering volume SmartStream’s solutions for reconciliations
insensitive, instrument solutions that and corporate actions to help manage SmartStream is committed to continue
have delivered greater control and their increasingly complex processing investing and strengthening operations
visibility to the transaction lifecycle. needs. At Northern Trust, a leading global in the Americas to meet clients needs –
We have increased our sales and custodian, we’ve worked with them to whether buy-side, sell-side, custodian,
relationship management team to create a global, centralised reconciliations outsource provider or retail bank, to
better support this growing customer centre of excellence using our leading become a strategic partner.
base, added expertise on our support TLM® Reconciliations solution.
desk and added capabilities to our
professional services team. Together, Recognising the growing importance of
this strengthens our ability to be a Latin America, highlighted by SWIFT’s
strategic business partner to our clients. recent moves into the region with its office

Focus on Americas
 NewsMatch 9

Consolidating reconciliations
through BPO
New TCS Aspire Service aims to boost STP rates and drive down cost
and risk, while removing operational limitations.

With increasing transaction volumes run by TCS offers the combined strength This is possible due to the service delivering
and falling margins on commoditised of an industry leading BPO provider and lower and more predictable transaction
products institutions are looking for new the industry leading reconciliations costs – either on a transaction or FTE basis
methods to deliver lower operational software vendor. – with the flexibility to manage market
costs and risk. This situation has been volatility. When volumes spike, more staff
compounded by the increased use of The TCS Aspire Service can process core are added, if they decline less staff are used
more complex instruments that must be and client-specific reconciliations, including and a lower cost is incurred.
reconciled at multiple points within the standard cash and stock, bespoke NAV

[
transaction lifecycle. reconciliations and cash collateral
management, with client-aligned Institutions of all sizes, business
One approach is to hire more people; investigations teams that are fully integrated models and geographic locations
however ramping up operations in a short to the client business. Institutions of all struggling with back office
period of time is tricky, due to lack of sizes, business models and geographic
volumes can take advantage
available skilled staff and the huge costs locations struggling with back office volumes
involved. Long term, throwing endless can take advantage of this service to cost- of this service.
resources at the back office is unsustainable. effectively reconcile all instrument types.
Many large Tier 1 banks are already
operating with around 1,000 FTEs Due to the inherent flexibility within TLM, The on-demand scalability is applicable to
performing reconciliations and are business rules can be modelled to each both large and small institutions who can
concerned about the continued growth client’s business needs and that can rapidly benefit from adopting best-in-class back
of these teams as volumes increase. evolve when new products are developed office operations. The TCS Aspire Service
using a variety of instrument types. With provides an opportunity to access industry
Consolidating siloed systems and processes the industry’s most advanced matching -leading processes that will constantly
through new business models can reduce algorithms delivering unsurpassed evolve to meet market, instrument and
cost and risk through increased STP and matching rates and supporting the widest regulatory needs. This removes one of the
deliver enhanced customer service range of asset classes, TLM enables a faster biggest hurdles, purchasing cost, to
strategies. The Aspire Service, powered by time to market for reconciling new delivering greater control and visibility to
SmartStream’s TLM® Reconciliations and instrument and a quicker time to benefit. the transaction lifecycle and increasing STP.

TCS Aspire Service

10

Creating a reconciliations community

As an institution that has embraced outsourcing, Deutsche Bank

is in a unique position to outline its vision for delivering greater
efficiency and value from the back office. Martin Slumbers,
Chief Operations Officer at Deutsche Bank discusses how the
bank analysed its reconciliations processes and its reasoning
behind choosing to move to the TCS Aspire Service.
Martin Slumbers
Chief Operations Officer,
Deutsche Bank

What are the major pain points for any reconciliation types as possible and the What makes the TCS Aspire Service an
large institution in terms of managing its supporting technology. For all reconciliations attractive proposition?
reconciliations operation? identified and managed by a central group It’s attractive because it is a Business Service
Reconciliation operations have evolved we also implemented a comprehensive set Provision offering, delivering not only
over time to meet changing business needs, of metrics, key performance indicators and operations capability but also technology
growth and new instruments. That has led service level agreements. These all give us a provision. As Deutsche Bank moves part of
to them being spread across multiple view of the technology costs, the personnel its reconciliations into the Service, we can
technologies and, in plenty of cases, still costs, the operational costs in terms of focus on our reconciliation processing
performed manually. On top of this there errors and also an overall perspective on efficiency and reduce overlaps in the
is no standardised operating model that is the quality of our reconciliations activity. related technology required to support
scalable and has the capacity to keep pace these reconciliations, without having to
with an organisation that is rapidly Did that prompt the review of these invest in new technology as a replacement.
changing in terms of products, volumes, operations? Additionally, taking an entire service from
locations and regulatory impact. First of all the question is how to enforce the TCS Aspire means that Deutsche Bank will
discipline of a metrics driven performance not have to worry about technology
In addition, as the business continues to model and optimise the process involved. refresh costs in the future.
develop and new instruments come on board After that the question has to be asked
it is essential to identify those reconciliation where service capacity can be centralised in What makes it attractive to the industry
types that are strategic enablers and focus on order to increase capacity in a cost efficient as a whole?
those as they will give the greatest return to manner. The reconciliations process has The same benefits that Deutsche Bank can
the firm. matching rules that can be documented see in TCS Aspire should be attractive to
and the resultant process can be other organisations as a general benefit.
How did Deutsche Bank go about procedurised. Deutsche Bank for example Additionally, organisations wishing to move
measuring the effectiveness, time spent, operates in all time zones around the world to newer reconciliations technology can
overheads of its reconciliations? and should use this advantage effectively to move into TCS Aspire which will take care
As part of a broader undertaking, a place the exception data in the hands of the of the operations processing and the
functional domain analysis was performed process owners many hours earlier in the technology, meaning dramatically reducing
across the organisation to highlight as many business day. the cost of accessing the latest

Executive Viewpoint
 NewsMatch 11

reconciliations technology. Lastly as What benefits does Deutsche Bank How will it measure these benefits?
more organisations join TCS Aspire, the believe it will achieve with Aspire? We will be measuring these benefits via
configuration data for many different Deutsche Bank believes that through several criteria. Examples of these will be
reconciliation types will become available partnering with leading outsourcing and less FTEs engaged in reconciliations type
for the TCS Aspire community, resulting technology providers in TCS Aspire its goals activities, the financial benefits of retiring
in greatly reduced implementation and will be achieved sooner. In no particular reconciliations technology and ultimately,
testing efforts. order, these goals are the automating of as due to the scale benefits that TCS Aspire
many different reconciliation types as will bring, in reduced transaction costs and
Was there a comfort factor for Deutsche possible, the streamlining of reconciliations less operational losses due to improved
Bank in TCS Aspire being a combination providing technology and therefore a reconciliation matching and investigation
of the leading outsource provider using significant reduction in the cost of capability. Ultimately TCS Aspire will also
SmartStream’s market-leading technology? reconciliations technology and also to be leveraging its knowledge base of
Yes. Moving to a BSP model requires a lot significantly increase the auto-match rates reconciliation types, common errors and
of trust in the service provider so it was for all reconciliation types (simple through the technologies involved to recommend
important that we could trust both the to complex multi-way reconciliations). (and possibly assist in) technology solutions
outsourcing provider and the technology to actually remove some reconciliations at
and both could demonstrate a substantial This could, of course be achieved via much source thus further reducing costs.
track record within the financial services hard work within the bank and the support
industry. It was also just as important to of outsource and technology providers as How soon does Deutsche Bank expect
find a combination of providers who were stand-alone relationships, but the creation to realise these benefits?
looking to use the latest tools and techniques of TCS Aspire and its planned community We expect to start seeing these benefits
to develop a service where process of reconciliation types and clients will from day one, i.e., as soon as a single
transformation and process efficiency were accelerate these goals not only for Deutsche reconciliation type is live within TCS Aspire
more important than the traditional method Bank but for other users of the service as well. and thereafter with increasing benefit as
of judging success by the number of more reconciliations are rolled out.
resources working for any particular client.
12

Supporting post-trade processing

of complex instruments
As the buy-side continues to experience pressure to process
growing business volumes in increasingly complex asset classes,
SmartStream has released TLM® Trade Process Management 2.0
to address the post trade confirmation, settlement and exception
management needs of financial institutions.

Steve Miller
Senior Product Manager,
SmartStream

SmartStream’s Business Process The TLM TPM 2.0 release covers middle-
Management suite, TLM Control, forms office confirmations and matching
the foundation of the next generation functionality for equity and fixed income,
Trade Process Management (TPM) platform. complemented by settlement instruction,
It consolidates fragmented and siloed confirmation, status tracking and exception
infrastructures for equities, fixed income, handling not just for ‘vanilla’ equity and
treasury and derivatives to deliver integration fixed income but also for more complex
and control to the post-trade environment. multi-settlement date instruments.

[
The in-built multi-settlement date capability
Business logic and process models can be simply is critical for all manner of instruments
amended to match new requirements and permissions from repos with two settlement dates to
changed to display a new profile in a dashboard. interest rate derivatives with multiple rate
fixings out into the future. It ensures
TLM TPM will have the functionality
The inherent process and workflow agility moving forward to support new derivative
delivered by TLM Control has enabled instruments that demand multiple
TLM TPM to be rolled out quickly, using a settlements with agreed terms – price,
set of standardised processes that are easily date and currency. The visibility into
adapted to meet the variations in behaviour consolidated future cashflow requirements
demanded by asset classes beyond the across all asset classes is one of the key
traditional equity, fixed income, FX and benefits of the TLM TPM platform.
Money Market. The agility delivered by a
code-free approach allows this new iteration TLM TPM recognises the need for
of the TLM TPM solution to provide different operational groups to access
greater levels of flexibility to meet the different data views to perform tasks.
constantly evolving needs of institutions. Functionally rich dashboards, utilising

Type Process
Trade here Management
 NewsMatch 13

TLM WebConnect’s Design Studio, provide

different sets of user permissions to enable
users to access different dashboards and
business logic tools. Version 2.0 also offers
more operational monitoring and multiple
settlement date analytics out of the box.

This flexibility is critical in a market where

derivatives are putting huge pressure on
operational infrastructures. The use of TLM
Control and TLM WebConnect deliver a
faster time to benefit to institutions looking
to manage complex instrument lifecycles
and deliver greater operational control in
a shorter time.

Further, as market infrastructures and

instruments continue to evolve, the inherent
agility of TLM TPM ensures it can be extended
and enhanced using TLM Control. Business
logic and process models can be simply
amended to match new requirements and
permissions changed to display a new profile
in a dashboard. This enables institutions to
move away from static solutions with hard
coded business logic that cannot react to TLM Trade Process Management – solution overview
institutions’ post-trade processing needs.

As a result of these improvements, TLM

TPM 2.0 enables trade confirmation
14

The
derivatives
conundrum
As derivatives volumes continue to soar,
what are the implications for the
middle and back-office?

While outstanding confirmations for the equity world because it is client-based,

credit derivatives have dropped by some versus credit where it is predominantly
70 percent after intervention by the interbank, so you have a bigger population
Federal Reserve, there remain significant of participants and actors in the market
challenges to automating the wider to penetrate in terms of automation,”
derivatives infrastructure. says Steve Miller, Senior Product Manager
at SmartStream.
Dr Mayiz Habbal, Managing Director of
the Securities and Investments Group, According to recent figures from the
Celent, explains: “The percentage of trades Bank for International Settlements (BIS)
confirmed electronically is now at 80 the total amount of OTC derivatives
percent, but the volume of trading in all traded totalled $415 trillion in 2006, the
derivatives continues to grow and not highest level since the BIS began compiling
all derivative types are experiencing the data. However, with this growth has come
same levels of automation.” concerns that it is outpacing processing
capacity and expertise.
Institutions require systems and processes
to reduce the number of outstanding It is estimated that up to 30 percent of OTC
items, while also automating processes derivative trade confirmations contain an
to avoid backlogs reoccurring. “It was error and require subsequent handling for
always going to be a bigger challenge in rebooking or amendment, exposing these

OTC Derivatives
 NewsMatch 15

and used in different ways. The increased purchase technology that is multifunctional,
backlogs, number of errors and staffing product neutral and designed to handle
issues highlight the need for automated any security type. Many of the vendor
solutions that deliver a volume insensitive, solutions today are geared to a single type
instrument agnostic approach is clear. of security. SmartStream’s TLM Trade
Process Management solution takes a
Steve Miller explains: “Fund managers different approach, to deliver an instrument
are concerned they are slipping down the agnostic and volume insensitive post-trade
rankings compared to hedge funds. They environment flexible enough to cope with
need to trade certain types of derivative changing market demands.”
instruments now and know there will be
new OTC instruments in the near future. TowerGroup’s Delano comments: “Firms
The problem is they are prevented from that have flexible tools can enable their
doing so because their middle and back- portfolio managers and traders to employ
firms to operational risk and significant offices are not geared to cope.” new derivatives faster, while meeting their
back office costs. Cherie Graham of the operational goals for efficient and error
Derivatives Product Group at Brown The first step to overcoming these issues free processing.”
Brothers Harriman, says: “Another significant and enabling greater automation is capturing
challenge for asset managers is reconciling and exchanging data using agreed formats.
OTC derivatives positions with FpML’s product definitions – the ability to
counterparties. The traditional tools rely represent dates, credit and equity
on fixed data formats for automation, derivative trade structures in electronic
but these paradigms do not apply to form – is supporting the drive for
OTC derivatives.” automation. The key derivatives service
providers, SwapsWire, DTCC Deriv/SERV
Frank Partnoy, derivatives expert and law and T-Zero, all use FpML as the underlying
professor at the University of San Diego, standard to communicate trade information.
comments: “Many institutions do not ‘mark
to market’ complex derivatives to reflect Peter Delano, Research Area Director,
changes in value over time. The result is TowerGroup, adds: “One paradox in strategies
that exposure, as in the case of sub-prime to improve OTC derivatives processing
instruments, can be buried and unexplained is the need for collaboration even though

[
“As volumes grow we will see automation
As volumes grow we will see automation attempts attempts move from the front office to the
move from the front office to the middle and back-office. middle and back-office. This will be due
This will be due to risk management concerns rather to risk management concerns rather than
than cost or operational efficiencies. cost or operational efficiencies,” adds
BBH’s Graham.

for months. More and more, as a result of individual institutions customise each The benefit of structured services
recent experience with sub-prime and contract. As a result, solution providers and standards such as FpML is clarity
other complex instruments, both investors need their technology to be standardised of information, providing a clear,
and regulators will want investment and flexible: standardised so that OTC documented position. With TLM
managers to give them more transparency interactions are repeatable and efficient; Trade Process Management, a firm can
through better operational practices, flexible to handle the customisation of extrapolate that data over all outstanding
including regular marking to market.” terms and range of counterparties.” deals to create a cash flow ladder. This
Steve Miller adds: “Institutions are currently can be taken a step further and used over
The back office issues of instrument too reactive because of the way their all assets to examine the precise funding
complexity, lack of standardisation and operations are structured. They want to levels required in each settlement location
volume growth will only be magnified as be more proactive in order to manage risk to cover the firm’s obligations on each
new OTC derivatives products are created more effectively and typically prefer to settlement date.
16

Case Study | RZB

Delivering service innovation

over the Internet
In a competitive market, how do you RZB has gained a reputation as a service- The outsourced payment processing unit
deliver a brand that stands out from the oriented bank, offering customised banking Raiffeisen Data Service Centre currently
crowd? For Raiffeisen Zentralbank solutions to each individual market. employs in its investigations department
Österreich AG (RZB), part of the Austrian “Although we are an Austrian bank, we 25 customer service employees responsible
Raiffeisen Banking Group, it was to create define our ‘home’ market as Central and for payments processing, including
an innovative service that reduces risk Eastern Europe and have been active in these reconciliations and investigations, not only
and costs, while also delivering greater markets for many years with its 17 banks for RZB but also for customers of the
self-service to clients. in 16 markets,” explains Walfried Lemerz, RZB Group. “Clearly if we can reduce the
Head of Transaction Services, Infrastructure costs in this centre we can deliver a more
Department at RZB. “We pride ourselves cost-effective service to our clients,” says
on providing tailor-made solutions Lemerz. We believe with TLM Corona we
and services that meet the needs of each have the solution that will enable us to
particular market.” deliver greater self-service elements and
efficient, more personal customer service
The bank had been successfully using that will differentiate us from other banks.”
SmartStream’s Corona Enterprise Edition
and upgraded to TLM® Corona with a view Customers currently email, fax or call
Walfried Lemerz
Head of Transaction Services,
to extending its integrated reconciliation RZB’s Service Centre where staff input
Infrastructure Department, RZB
and investigation capabilities to customers the query into the Corona Investigations
over the internet. Using TLM WebConnect module. The web-based solution will
as a secure browser interface, RZB customers remove that step, negating the need for
were able to proactively raise exception data re-entry that is a source of potential
cases and create greater customer self-service. errors and risk. RZB customers can enter
transaction details via a secure browser,
open a query and trigger an investigation
case at the touch of the enter key.

Customer self-service
 NewsMatch 17

[
“It’s an innovative step and we think this
We want to create a near-STP process, so that the sort of self-service option is the future
data goes from TLM Corona to the core bank system of banking relationships. We want our
to provide an automated response. We’re at the customers to be actively involved in the
beginning of that vision, but we feel that with TLM reconciliation and investigation process,”
Corona we have the foundations in place to make says Lemerz. “We believe that if you
give the customer more power through
that a reality. the right self-service tools then customer
service and satisfaction will improve.”

Once the query has been raised, RZB staff vision, but we feel that with TLM Corona
will then investigate the case as normal. we have the foundations in place to make
that a reality,” explains Lemerz. “We’ve
To increase its reputation as a service- calculated an ROI within three years by
oriented bank, RZB will continue to use reducing the amount of time our employees
TLM Corona as the key element in spend on investigations. That will enable
delivering this vision. RZB currently has us to use their time more effectively to
a high success rate, with around 90 percent perform higher value work.”
of all queries resolved within 48 hours but
is looking to improve that even further. RZB has piloted the online service with
two Baltic banks and has also received
“We want to create a near-STP process, so interest from domestic Austrian banks.
that the data goes from TLM Corona to the The bank is aiming for at least 20 percent
core bank system to provide an automated of customers – banks, private individuals
response. We’re at the beginning of that and corporates – to take up the service.
18

Case Study | Northern Trust

Driving a new reconciliation

methodology at Northern Trust
Bob Sturgis
Northern Trust

The Northern Trust Company is a

leading global custodian with more
than $4 trillion in assets under custody.
Global Reconciliations across Northern’s
Operations was recently centralised
under Bob Sturgis. A main priority
of this new group was to consolidate
reconciliation systems onto a global
platform, one that could handle
more than 30 million transactions a
month running through its operations.
To achieve this vision, Northern selected
TLM® Reconciliations as its enterprise-
wide reconciliations solution.

A long standing SmartStream customer

– moving to TLM was a natural step for
the bank as they looked to take advantage
of the improved matching and assignment
capabilities in the next generation solution.

Reconciliations
 NewsMatch 19

Delivering value through The benefits of adopting a transactional Looking ahead: reconciling
continuous process improvement reconciliation approach can go further, more complex instruments
High on Northern’s and Sturgis’ agenda according to Sturgis. In Northern’s case, As Sturgis looks ahead to where the next
when selecting a reconciliations solution higher STP rates and lower cost of operations big improvements will come from, he
was ensuring it would create an environment went hand-in-hand with risk reduction. highlights an important initiative to
for continuous process and operational extend the benefits of TLM’s transactional
improvement. According to Sturgis: Sturgis explains: “We were pleased with reconciliation capabilities to other, more
“A significant advantage with TLM vs. the tremendous value from our DTCC complex instruments.
other platforms is the very flexible match reconciliation effort. Significant work
rules that allow us to quickly adjust our around the data and match rules produced Northern is performing ETD (Exchange
rules as we discover opportunities.” a match rate in excess of 98 percent. This Traded Derivatives) derivatives reconciliations
Northern’s managers have been able to led to a 67 percent decrease in Northern’s on TLM Reconciliations in the UK, so
monitor their operational processes, and exception counts. For our team, there’s less the firm is already familiar with tackling
when they see opportunity for improvement, work to reconcile, but more importantly, complex instruments. The current project
quickly implement those ideas, contributing there are fewer exceptions assigned to our drawing attention is mortgage-backed
to better STP rates and better service levels internal processing groups.” securities (MBS).
for Northern’s customers.
The implementation plan is similar to

[
the one Northern put in place for DTCC.
Significant work around the data and match rules produced Moving from positional to transactional
a match rate in excess of 98 percent. This led to a 67 percent reconciliation. MBS and CMOs
(Collateralised Mortgage Obligations) are
decrease in Northern’s exception counts. For our team, there’s
resource-intensive instruments, requiring
less work to reconcile, but more importantly, there are fewer more effort to identify and resolve these
exceptions assigned to our internal processing groups. exceptions than an equities break. Says
Sturgis: “We expect that as we saw a big
jump in productivity with the DTCC rec,
we’ll see a similar improvement in
Transaction-based reconciliation Extending the straight complex fixed income transactions.”
For years, Northern Trust has been at the through process
forefront of implementing a transaction- There is a second aspect of the TLM
based reconciliation methodology. implementation that Northern found
Many firms are just now evolving from a to be valuable.
positional reconciliation to the more granular
method of transaction-based reconciliation. The auto-assignment process, as Northern
calls it, is built on TLM’s integrated workflow,
For example, custodians typically view which allow exceptions to be passed straight
their overall position in IBM stock on a through to the departments responsible
given day and compare that position to the for investigating and resolving them. This
DTCC (Depository Trust & Clearing eliminated the tedious work and errors
Corporation) records. The problem with involved in having someone manually
the big picture delivered by the position judge where an exception should be resolved.
approach is it lacks the detail of
transactions beneath the total number.
“The positional reconciliation could mask
errors in client accounts,” comments Sturgis.
“Transaction-based provides a detailed
reconciliation and lowers the risk for
our clients.”
20

Web 2.0
set to transform
customer services

Neil Vernon Matthew Nelson

Senior Product Manager, Senior Analyst, Investment
SmartStream Management, TowerGroup

The potential to significantly change the way institutions

connect to, service and support customers.

Web 2.0, the second generation Internet- They have the potential to significantly customers to raise payment exceptions
based services that use the Web as a platform, change how information is shared and start an investigation.
have generally been limited to consumer- both within an organisation and to
focused applications. However, web-based its customers. “In today’s Web 2.0 world, self-service
applications using rich user interfaces are and extensibility are essential. But to
due to make an impact on the financial Web 2.0 is a compelling draw for achieve those you need to use the right
services sector. institutions battling to gain market share technology,” says Neil Vernon, Senior
because the concept and technology is, Product Manager, SmartStream.
While Facebook and Myspace currently by its very nature, inclusive. Services and “SmartStream, with its WebConnect thin
have limited value to the financial services applications can be made more compelling client across the range of TLM® products
industry, the driving principles behind through greater levels of interactivity. For and solutions is pioneering the use of
them – networking, collaboration and example, banks can roll out more self-service Web 2.0 in areas such as reconciliations
participation – are applicable today. elements in a secure environment to and exception management.”

Type 2.0
Web here
 NewsMatch 21

[
live windows operate and interact
Forward thinking software firms are developing user concurrently – supporting seamless multi
interfaces as thin client, such as SmartStream with tasking. “We make data comparison simple,
WebConnect, offering Web 2.0 technologies without with the ability to move data between
sacrificing the performance and functionality associated windows and by providing standard
spreadsheet functionality,” says Vernon.
with desktop applications.
“The dynamic workspace also recognises
the fact that users are frequently
interrupted with urgent requests – rather
The importance of these developments in applications. WebConnect looks and feels than having to stop the task at hand, exit
the securities industry has been highlighted very similar to its original thin-client the application and log back in users can
in a recent report by Matthew Nelson, interface but with no local software installed.” simply open a new window and respond.”
Senior Analyst, Investment Management
at TowerGroup. He believes that Web 2.0 “The advantages of the Web 2.0 model are “The development of web-based user
technology will dramatically change the compelling. Why install software in a thick interface for exception-centric applications
software applications used by securities client model, when you can use the offers firms the ability to engage business
firms and how they are used within an internet to dramatically reduce roll out partners – counterparties, brokers, clients
organisation and outside to communicate times,” says Vernon. “This method also – in a secure application that will enable
with customers, trading partners and the helps to overcome user acceptance issues collaboration,” adds Nelson. “Working with
wider market. that can often impact on the effectiveness partners in a more self-service environment
of new solution roll outs. WebConnect enables them to correct transactions,
“By embracing the concepts of collaboration delivers a consistent user experience and enrich information and close exceptions
and participation, Web 2.0 applications as a result end user training is reduced faster, in a more efficient manner.”
have the potential to change the way firms and productivity is increased.”
work,” he says. “More and more financial For example, an institution offering an
services institutions will use the Web 2.0 Delivering transactional data to outsourced reconciliation service can
concept to make their services and business partners and customers bring partners into the process by sharing
applications richer and more compelling Crucial to the success of Web-based information on broken transactions to
to users, whether that’s internal staff technology and particularly those that dramatically reduce investigation time.
or a customer.” drive collaboration across an enterprise Similarly, a fund manager could be bought
is rich functionality. TLM WebConnect into the Corporate Actions processing
The TowerGroup research, “Web 2.0 May doesn’t compromise on this or in the lifecycle earlier.
Be the Future of the Internet, but What delivery of information to users;
Does It Mean to Securities Firms?” highlights management, operational users and With Web 2.0 evolving the internet into
several areas where Web 2.0 technology customers can all share a single source a more collaborative workspace, enabling
can be applied to the securities market, of real time transaction information. customers to build their own views of
beyond the obvious knowledge management portfolios, news, and other user-specific
and collaborative tools. “With WebConnect, users gain all of the content in a lightweight interface will add
rich capabilities of a traditional application significant value.
The four areas it believes offer the greatest with the ease of delivery of a web
potential are: application to quickly and easily compare “As securities firms and their clients
data sets from different systems and drill become increasingly global, tools that
• Investment research down,” says Vernon. “Clients can access help to break down geographical barriers
• Information distribution a range of SmartStream applications to will become essential to acquiring and
• Client interaction manage transaction lifecycles. TLM retaining clients. Web 2.0 applications
• Business partner interaction WebConnect ensures that irrespective will be one of those tools and will play a
of which application a user is in, the key role in the internet strategy of every
Says Nelson: “Forward thinking software experience is the same.” securities firm,” concludes Nelson.
firms are developing user interfaces as
thin client, such as SmartStream with TLM WebConnect’s design recognises
WebConnect, offering Web 2.0 technologies the need for operational staff to react to
without sacrificing the performance and immediate situations. It provides users
functionality associated with desktop with a dynamic workspace where multiple
22

Moving towards standardisation

and greater efficiencies

Foreign investment, deregulation, stronger currency valuation,

economic growth and low interest rates have helped to
create a productive environment for Latin America’s financial
institutions. The region’s banks have benefited from greater
demand for cash and payment services, the transfer of
technology and capital flows, consolidation and sound
business management.

According to SWIFT representative Michel operations with international banking

Corthouts, Regional Director, Latin America: standards and help to facilitate the flow
“Latin American banks have begun to shift of payments among countries.
towards a more global banking model,
similar to that found in Europe or the US – SWIFT representative Lambert Timmermans,
before their cash and payments operations Commercial Manager, Latin America, says:
reflected a more localised approach.” This “Until recently, banking operations within
change has been characterised by more each country developed their own localised
robust and innovative offerings in lending, financial messaging systems and there was
credit and investment services. Banks a lack of integration within and among
have also been adopting initiatives designed regions.” However, with an increase in
intra-regional financial activity and higher

[
transaction volumes, this is likely to change.
Latin American banks have begun to shift towards a more Colombia’s Banco de Bogotá is reflective of
global banking model, similar to that found in Europe or general efforts by banks across the region
the US – before their cash and payments operations that recognise the strategic value in
reflected a more localised approach. automation and centralisation to deliver
greater transaction visibility and improve
straight through processing (STP). The
to improve efficiencies and standardise bank operates 500 retail branch offices, five
international back-office banking systems. corporate service centres and six subsidiaries,
As an example, SWIFT’s Latin American servicing both the corporate and retail
office has been working closely with market segments. It maintains a strong
institutions in Brazil, Mexico, and Colombia international presence through subsidiary
to implement the organisation’s financial and agency offices in Panama, Miami,
messaging platform. This will allow for the New York and the Bahamas, and strategic
integration of banks’ payment and securities partnerships with banks in other locations.

STP in Latin America

 NewsMatch 23

Banco de Bogotá continues to reinforce its Banco de Bogotá has become aware of
position as a leader in Colombia’s commercial the importance of centralised accounting
banking sector through cost-effective processes and is moving forward with
operations. Today, the bank uses SmartStream’s this new structure to establish a General
Corona reconciliation software to support Accounting Management Division.
its vision for cost-effective, international In addition to other benefits, this will enable
back office operations that can support easy and speedy reconciliation processes.
higher transaction volumes. According to Mr. Escobar: “Corona
will be an integral part of this initiative;
Previously, all reconciliation activities helping the bank to achieve its long-term
were processed manually through goal of creating a centralised platform
the bank’s individual branches. The through which all cash and payment
implementation of Corona has created transactions flow.”
more centralised banking operations,
delivering higher matching rates and With SWIFT aiming to bring greater
greater STP. This has enabled it to standardisation to Latin American markets
reduce operational costs and risks. and the region’s strategic and economic
importance to global banking groups growing,
Fernando Enrique Escobar, International the region will undoubtedly continue to
Bank and Treasury Operations Manager, evolve. New, more complex instruments
says: “Corona has been extremely well- will be traded, volumes will continue to rise
received by its users, who appreciate the and financial institutions will increasingly
application’s ease of use, Spanish-language require solutions that deliver control and
instructions, flexibility and integrated visibility to their middle and back-office
matching and investigations capabilities.” operations. This will enable them, like
Mr. Escobar also praises the solution’s Banco do Bogotá, to reduce operational
seamless installation process, and short, cost and risk and be confident in their ability
two week implementation cycle. to handle future volumes.
24

Case Study | ING Investment Management Australia

Reconciliations – move up
the transaction lifecycle
ING Investment Management Australia has
reduced costs and improved process visibility
using TLM® Reconciliations.

Creating automated reconciliations However, as Steve Parkinson, Director of types of securities, along with the differing
processes in a more timely manner, along Operations at ING IM, explains, these format of data received from third parties,
with greater visibility of the resulting processes did not produce the “control” even though we used SWIFT messages
reconciliation items, is a key element to environment that the institution desired. where we could,” explains Parkinson.
reducing risk. It was one of the important “With semi-manual processes and the time
drivers behind ING Investment it took to reconcile securities we believed With the analysis complete, TLM
Management (ING IM) in Australia we were leaving ourselves exposed to Reconciliations was implemented for
choosing TLM Reconciliations to manage unnecessary data integrity risk, particularly approximately 80 percent of the securities
the reconciliation control requirements on the securities side.” he adds. held within those first 70 portfolios. A
of around 1,000 portfolios with a value of second phase added a further 700 portfolios
approximately AU$40 billion. To reduce this risk, ING IM wanted to for the same security types, while the third
build a “control” environment around phase included another 150 portfolios to the
As part of the specialist investment network best-in-class, packaged technology to give solution. A final phase will shortly see the
of the Dutch ING Group, ING IM has it confidence that the data supplied from remaining portfolios migrated.
a strong presence in Australia and prides its investment system reflected actual
itself on offering investment management positions within its portfolios. To support With the majority of its portfolios now
expertise across all major asset classes. this vision, ING IM selected SmartStream’s utilising TLM Reconciliations, ING IM
TLM Reconciliations due, says Parkinson, completes all of its cash, securities
ING IM used to perform daily cash to it being “the market leading solution reconciliations at settlement and securities
reconciliations for all accounts and fortnightly with a good reputation and excellent holdings reconciliations on a daily basis.
or sometimes monthly reconciliations references from other organisations.”
of its securities in a ‘semi-automated’ This more proactive approach has helped
environment using Excel spreadsheets, As part of its initial roll out, ING IM ING IM to reduce risk and deliver greater
Access databases and other desktop tools. selected around 70 portfolios that visibility of it’s reconciliation items.
A team of seven people produced and represented a cross section of its overall Reconciliations have now moved from
managed the reconciliations function, with business and the securities held within being performed irregularly on a settled
a further two staff analysing the end result them. “That analysis took around five basis to a daily traded basis, moving the
and checking data integrity. months because of the many different process further up the transaction lifecycle.

Reconciliations
 NewsMatch 25

down to individual users can log into

[
TLM Reconciliations and view any
We are now spending much more time discovering why
exception items within any portfolio.
an issue occurred in the first place, strengthening our
processes and supporting more robust back-office operations. However, this is just the start of ING
IM’s use of TLM Reconciliations.
After migrating its remaining portfolios,
As a result of the greater automation The control and risk management the institution is implementing the
delivered by TLM, ING IM has reduced functions have significantly improved due solution’s investigation and workflow
the number of staff needed to perform to the redeployment of staff to analysis- functionality. “I believe ING IM will
reconciliations. However, as Parkinson based roles. These staff now use the time see further benefits from the project’s
explains, the project ROI wasn’t based on previously taken up with purely completing next phase, helping us to deliver even
reducing headcount but ensuring existing reconciliations to ensure greater data greater efficiencies,” says Parkinson.
staff and the skills they had developed integrity and help reduce risk within
were used more effectively. the portfolios.

“The number of FTE equivalents has Says Parkinson: “The overall number of
been reduced from seven to 0.5 managing reconciliation items has also been substantially
the lifecycle of a trade from execution up reduced and we are now performing
to settlement and 1.5 performing daily reconciliations in a timelier manner.
cash and securities at settlement as well as That, combined with a decrease in failed
the holdings reconciliations,” he comments. trades, means we have reduced risk
“The FTE equivalent saving has been within ING IM.”
transferred into analysis. We are now spending
much more time discovering why an issue This risk reduction has also been
occurred in the first place, strengthening our accompanied by increased transparency
processes and supporting more robust into reconciliation and exception
back-office operations.” processes. The Chief Operating Officer
26

Streamlining
payment exceptions
The handling of payment investigations remains one of the
most resource intensive back-office activities, representing
a significant cost for the banking industry, hampering efforts
to deliver effective customer service. However, recent changes
to SWIFTNet services present an opportunity for institutions
to make a step change in payments processing.
Catherine Banneux
Senior Product Manager,
Banking Industry Division, SWIFT

Launched in September 2006, SWIFTNet “Free format messages lack the structure The combination of automated solutions
Exceptions and Investigations (E&I) and granularity needed to quickly understand and new SWIFT Standards XML with a
protocol is designed to deliver greater why the payment instruction had failed SWIFTNet messaging service and a rule
automation in payments by replacing free and this meant investigations could take book is helping to create a more
format messages. This XML-based a long time to complete.” streamlined, automated exceptions and
protocol uses the existing SWIFTNet investigations process. Currently 26 banks,
InterAct service to enable institutions to The cost of dealing with these enquiries including ABN Amro, Bank of New York,
exchange messages in an automated and varies according to the level of automation Barclays, JPMorgan Chase, Royal Bank of
interactive way through its Store and within each bank. A report commissioned Scotland and Wachovia, have subscribed
Forward capabilities. by SWIFT identified a number of key to the SWIFTNet E&I solution. Many of
challenges, including the high costs incurred these will be live by the end of the year,
Despite the drive for greater automation by manual investigation handling, the with others joining early in 2008. Together,
in recent years the continued use of free financial risk of manual processes and slow they represent more than 30 percent of the
format or proprietary format messages for resolution times, and poor customer service. SWIFT payments volume, and even more
enquiry related communication blunted of the US Dollar clearing payments volume.
the effectiveness of solutions designed to What is apparent from SWIFT’s research
enable more streamlined exception and is that institutions using an automated As banks’ payment and cash management
investigation management. SWIFT calculated exception management and investigations divisions come under increasing regulatory
that between three and five percent of solution such as SmartStream’s TLM® can and competitive pressure to improve
payment instructions led to an enquiry. see a substantial reduction, up to €4.80, operational efficiency, automation will
in the cost per enquiry. become increasingly important. For example,
“When we first examined the issue in 2003 the Single Euro Payment Area (SEPA) will
we found that only five percent of enquiries However, it is not simply a case of transactional force banks to lower their operational costs
were automated due to the use of MT199 cost; staff productivity was also proven to around payment processing and drive the
and MT299 messages. The lack of message increase. Investigators using automated need for higher payments STP. The UK
standardisation hampered automation systems solve, on average, 23 enquiries per Faster Payments initiative mandated
solutions, which added structure and day compared to just 14 when using for May 2008 will require all low-value
formalised payments exceptions and a combination of manual and interactive electronic payments up to £10,000 to be
investigations but couldn’t overcome the systems. Customer service can also cleared same day or next day depending
lack of standards,” says Catherine Banneux, be improved through automated systems, on payment initiation. To meet this
Senior Product Manager, Banking Industry with enquiry turnaround time cut from requirement, institutions must implement
Division at SWIFT. an average of 5.5 days to 3.6. near-real time processing models.

SWIFTNet E&I
 NewsMatch 27

[ …the Single Euro Payment Area (SEPA) will force banks to

lower their operational costs around payment processing
and drive the need for higher payments STP.

While many processing units achieve • Unable to apply There is also the issue of institutions’
impressive STP rates, management of • Return of funds ability to absorb new business and remain
exceptions and investigations remains one • Modification competitive as payment volumes increase.
of the most resource-intensive activities • Request for cancel This is particularly true of the larger
for a payments institution. With SEPA, • Beneficiary claims non-receipt of funds institutions that are planning to white label
Faster Payments and other initiatives their payment processing for smaller players
such as Basel II driving exceptions and SWIFTNet E&I is designed to support to meet customers’ cross-border payment
investigation capabilities further into improvement in the enquiries process, needs under SEPA. Manual operations
business processes, institutions will increasing efficiency by reducing cost and that cannot cope with high volumes and
require integrated enterprise-wide operational risk while improving customer the related exceptions create processing
solutions such as SmartStream TLM. service. When combined with a solution bottlenecks and further impact bank
such as SmartStream’s TLM Payments payment processing costs.
Potential for significant cost reduction and Investigations it offers significant
Substantial staff and communication opportunities for institutions to drive cost Says Banneux: “Without automation, banks
related savings can be achieved as a result from their operations, enabling them will have to hire and train new staff just
of automation and increased productivity, to standardise customer service processes to clear the bottlenecks. SWIFTNet E&I and
enabling investigators to concentrate on across the organisation. Workflow exception management solutions enable
more critical cases. definitions and rules, such as the no bypass banks to absorb new business and do it at
rule, ensure institutions can better inform a relatively low cost while maintaining
SmartStream’s TLM Payments and customers and provide shorter turn- the customer service levels its clients expect.”
Investigations solution can enable institutions around times.
to leverage existing investments in SWIFTNet Although the protocol was designed for
to create enterprise-wide exception “Cost reduction with SWIFTNet E&I is treasury payments, it can also address some
management processes that can deliver not simply a reduction in FTE. It’s the cost of the issues raised by compliance projects
greater visibility and control to the payments of an open position if an exception isn’t such as FATF7 and Basel II. For that reason,
process. It helps organisations to tackle managed effectively, potential liabilities says Banneux, SWIFT is keen to move the
the five main enquiry types that SWIFT arising from a missed payment, interest and solution into the securities industry, outside
identified as accounting for 76 percent of charges related to missed payment deadlines,” of pure payments investigations, to support
total payment queries: explains Banneux. efficiency drives and boost STP rates.
28

Maximise funding and lending

opportunities through enterprise-wide,
real-time cash management

The cash management function has been something of a poor

relation in the back-office. All too frequently manual and
batch-based processing within individual silos are still the Christos Elefteriadis
Lead Principal Business Consultant,
SmartStream
norm and banks fail to adopt an enterprise-wide approach.

The current approach at some banks is predictability and visibility needed to affect
neither real-time, reliable nor particularly ROCE. Having access to timely, secure
secure. With manual intervention comes transaction data – real-time information
the increased risk of errors and the lack of from internal and external sources – can
a clear audit trail. However, given the slim influence the firm’s cash balances and add
margins in banking today, there are value to lending and funding decisions
opportunities to gain a greater Return on at the earliest possible opportunity.
Capital Employed (ROCE) through more
efficient cash management processes. Cash managers need a system that allows
for multiple feeds from a variety of sources.
By moving to a more automated real-time Overnight batch files can still be utilised,
cash management process, banks can lower but supplemented by real-time feeds with
costs, improve investment decisions, boost details of other movements and status
liquidity management and gain the updates, including data from front-office

Cash Management
 NewsMatch 29

systems and custodians. These flows can

be clearly marked so that the cash manager
is alerted to exceptions (such as a settlement
break on a transaction) that may already
be included on the cash balance.

This enables the cash manager to make an

informed decision to include new trades or
updated information in their balance. Intra-
day updates such as cancellations, trade
confirmations and amendments can then be
sent through the cash management system.

With SEPA forcing firms to differentiate

themselves through service offerings rather
than price, real-time enterprise cash
management is an invaluable tool. Removing TLM Cash Management – the solution at work
silos and delivering timely data can enable

[
For financial institutions these capabilities
This visibility into cash positions facilitates intra-day
provide a valuable method for monitoring
liquidity management, enabling cash managers to payments and receipts made on behalf of
take advantage of differentials between borrowing clients in real-time, in exactly the same way
and lending rates during the day. a bank does. As a result:

• Funding and investment decisions can

the cash manager to make the most accurate reconcile expected movements with actual be optimised when they are based on
balance calculations to inform lending and movements to move from the traditional actual, rather than expected, information.
funding decisions and deliver greater value. end-of-day settlement reconciliation • Account sweeping can be based on
(often completed the following day), to actual data preventing possible account
Traditionally, banks looked at spot cash reconciliation on the same day. overdrafts.
flows to predict trends short term. However, • A client expecting to receive a larger
it’s possible to take a longer view, letting As a result, errors can be investigated on amount of money can monitor the
the cash manager use their market the day they appear or become apparent receipt of the funds. If there are any
knowledge to the best possible effect when and corrected while markets are still open. problems it can proactively take actions
making lending and funding decisions. This prevents breaks from occurring, in order to see to that the money really
lowering the likelihood of claims and is transferred on time.
Much of the success of the investment reducing the burden on Claims Departments.
decision rests with having accurate data When you consider the benefits of
at their disposal. That high quality data Better quality data, provided in real-time, using real-time data, both from internal
flow is only achievable with an integrated helps to prevent unnecessary use of overdraft and external sources, banks shouldn’t
cash management system such as facilities or having too much cash tied up be hesitating to invest in enterprise cash
TLM® Cash Management, delivering real in low interest positions. This visibility into management systems. Banks who use a
time information. cash positions facilitates intra-day liquidity single, automated global cash management
management, enabling cash managers to solution will optimise the funding and
In a perfect world lending decisions would take advantage of differentials between lending business and at the same time,
be based on internal data, however, not borrowing and lending rates during the day. de-risk operations and lower costs.
everything is settled in time, data is missed
or repeated and cash receipts aren’t expected. Through examining projected cash balances
The use of an enterprise, real-time solution and expected movements that won’t settle
offers numerous benefits. It allows cash on time, cash can be carried forward
managers to map cash, enabling them to and included in the next day’s balance.
30

TLM Corona goes from

®

strength to strength
Delivering increased transaction visibility and
supporting customer self-service initiatives.

The data flexibility delivered by TLM exception case. The same data can then be
Corona 7.3 enables it to pull transactional used to create an outgoing SWIFT message
details from any external bank system while the original payment instruction
and deliver the data to the user. As a forms the basis of the investigation. This is
result, TLM Corona can now provide a key functionality TLM Corona provides
a single interface into any bank system in order to support SWIFTNet Exceptions
– delivering a data and source agnostic and Investigations (E&I) workflows.
solution for banks.
Rudolf Schnepf
Product Manager – Reconciliations, These workflow enhancements in TLM
SmartStream
Increased data visibility helps to deliver Corona can also help banks to develop
greater control to the transaction lifecycle. automatic resolution of investigation cases.
Where exceptions occur, TLM Corona can Banks using TLM Corona’s thin client
support more effective investigations, as delivery can position themselves as customer
the same look up mechanism can be service innovators, providing online
used to pull data from external systems – investigation capabilities to their clients.
payment systems, core banking systems or This new level of self-service gives corporate
trade finance systems – and attach it to an customers greater control and visibility into
their transactions. For the bank it means
lower cost-per-customer while improving
the overall service level to clients.

[
Central to SmartStream’s development plan for
At large corporates, treasury and cash
TLM Corona is bringing new web components management teams can manage accounts
into the user interface and creating new online and where transaction breaks occur
user-defined dashboards. raise an exception case through the TLM
Corona WebConnect user interface and
create a case for investigation. This provides
corporates greater visibility into cash

TLM Corona
 NewsMatch 31

UK – Head Office

[ This new level of self-service gives

corporate customers greater control
and visibility into their transactions.

www.smartstream-stp.com

UK – Head Office India

St Helen’s Unit 7, Plot 15
1 Undershaft Western Industrial
London Co-Operative Estate Ltd
EC3A 8EE MIDC
Tel +44 (0)20 7898 0600 Andheri East
Mumbai 400 093
UK – Product Centre Tel +91 22 6641 2525
movements and true cash positions if a The drivers behind automating this process 1690 Park Avenue
Aztec Avenue Italy
payment has stalled or failed enabling are lowering operational risk reduction Almondsbury Via Annibale Caretta, 1
them to better control liquidity, cash and the need to lower operational costs. Bristol 20131 Milano
BS32 4RA Tel +39 02 742 09 41
and risk. For the bank it means they Customers, including Erste Bank in Austria,
Tel +44 (0)1454 617020
can deliver innovative trade finance, are now processing SWIFT MT 600 Luxembourg
cash and payment services. (Precious Metals Confirmation) messages Australia 33 Boulevard Prince Henri
3 Spring Street 1724 Luxembourg
and reconciling them with TLM Corona’s Level 8 Tel +352 26 63 48 10
Central to SmartStream’s development proven matching capabilities. Suite 1
Sydney NSW 2000 Singapore
plan for TLM Corona is bringing new web Tel +61 (0)2 8249 4359 70 Anson Road
components into the user interface and As announced at Sibos last year, TLM #26-01 Apex Tower
Austria 079905 Singapore
creating new user-defined dashboards. Corona’s supported language list has
Vienna Twin Tower Tel +65 6 224 76 89
TLM Corona 7.3 includes interfaces for expanded to include Chinese and is now Wienerbergstrasse 11
cash, payments, revenues, FX, money live at China’s second largest bank. We 1100 Vienna Spain
Tel +43 (0)1 313 54 0 c/ Goya, 15 - 6º drcha.
markets, derivatives, precious metals, continue to extend the local language 28001 Madrid
securities holdings, transactions, capabilities available in TLM Corona to China Tel +34 91 598 49 30
15/F NCI Tower
settlements, corporate actions and trade support our customers’ global operations Office 1525 Switzerland
confirmations and more will be added and ambitions. 12A Jianguomenwai Av Seefeldstrasse 69
Chaoyang District CH-8008 Zürich
over the coming year.
100022 Beijing Tel +41 (0) 43 488 37 58
Tel +86 (10) 8523 3042
For example, TLM Corona’s development USA
France 61 Broadway
has continued with support for customers 33, rue Galilée Suite 2824
reconciling precious metals transactions. 75116 Paris NY 10006
Tel +33 1 444355 54 Tel +1 212 763 6500
The continued rise in precious metals
trading has prompted operations Germany 250 N.E. 25th Street
An der Welle 4 Miami
departments to look for greater
60422 Frankfurt Florida 33139
automation. This is because outstanding Tel +49 (0)69 7593 8013 Tel +1 212 763 6500
confirmations are still managed manually,
which takes time and creates risk.

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Copyright in all published material including photographs, drawings and images in
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SmartStream Technologies has taken all reasonable steps to ensure that everything
published is accurate it does not accept any responsibility for any errors or resulting
loss or damage whatsoever caused and readers have the responsibility to thoroughly
check these aspects for themselves.
 Take
Control
with Transaction Lifecycle Management ®

SmartStream’s Transaction Lifecycle  Cash Management

Management (TLM®) software solutions
 Compliance Management
bring operational efficiency, real-time
visibility and risk control to the Middle  Corporate Actions
and Back Office.  Exception Management
Highly scalable, automated processes track
 Reconciliations
and control entire transaction lifecycles as  Trade Finance
they break through organisational silos and  Trade Process Management
extend beyond the enterprise. Collaborative,
flexible processing environments are created that
support, not limit your business.

Integrated human and system workflow at the

heart of SmartStream’s TLM solutions provides
robust processes and a complete audit trail of every
transaction. Regulatory compliance is made easier
while risk and costs are reduced.

To find out more, please call:

Americas +1 212 763 6523

Europe +44 0207 898 0631
Asia +65 6224 4761
info@smartstream-stp.com www.smartstream-stp.com