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September 30, 1999

The Coming World Of Global Trading: TFM Promises to Improve International Links

By Melody Marsalis

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  • The Coming World Of Global Trading: TFM Promises to Improve International Links

The securities industry is rallying forces to build a global stock trade processing application to handle the swelling volume of cross-border trades.

A group that represents U.S. and European financial institutions engaged in cross-border trades, dubs the new application, Transaction Flow Monitor (TFM). A secure underlying network will support TFM, a post trade, pre-settlement matching tool aimed primarily at fund managers.

The group, the Global Straight Through Processing Association (GSTPA), recently announced a list of 17 companies that responded to its Request for Information. That RFI is part of the three-step process of selecting a consortium of vendors to build the new system. (The GSTPA was formed last year to achieve cost efficiencies in global cross-border trading.)

The TFM system is expected to be pilot tested next year, and in production about 12 months later.

C. Steven Crosby, a partner at the financial services consulting group at KPMG, which was enlisted by the GSTPA to assist in the selection, said TFM would have far-reaching consequences.

By replacing manually intensive steps for communicating data in the electronic trade confirmation process, TFM will become "the first global system to provide multi-lateral interconnectivity between broker dealers, investment managers and custodians worldwide."

The GSTPA is the forerunner to the Global Straight Through Processing Committee, which is working on a technical blueprint for the ambitious plan. The GSTPA is coordinated by Anthony Kirby out of London. He previously headed Securities Traffic Development for SWIFT (Society for Worldwide Interbank Financial Telecommunications). The committee is talking with several Asian firms about joining the group.

The Candidates

In June 1998, about 100 vendors expressed interest in bidding for the project. A subset of that group was then invited back to submit a response to GSTPA's RFI. That required the vendors to outline their qualifications to complete the project. The committee is now reviewing those vendor responses. Bidders participating in the final Request for Proposal (RFP) phase will be announced soon. Crosby says the entire selection process will be completed by Thanksgiving.

The GSTPA did not disclose estimates for the project. But according to a story in The Wall Street Journal, technology providers estimated the cost of building the new system at between $60 million and $100 million. Those estimates do not include the price tag for individual firm's plug-ins, so-called Participant Access Modules (PAM), for the TFM application.

The GSTPA plans to release a study that will justify the cost of building the new system. The study will examine the costs and savings for participating firms.

Crosby says the cost to build the system will be recouped in part by savings achieved in reducing "failed" cross border trades. "There is a strong and compelling business case. There will be significant savings for the industry," he said.

The Big Guns

Several international firms and financial utilities have submitted bids to build the new system. These include the New York-based Depository Trust Company and SWIFT in partnership with Oracle Corp., Andersen Consulting and Hewlett-Packard. Computer giant IBM announced plans in September and teamed with Reuters Group and Equant N.V. to compete for the trophy project. At the same time, Big Blue inked a deal with PaceMaker software. That software would handle post-trade data coming into IBM middleware applications for transaction processing.