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December 1, 2002

A Step Closer to Global STP

By Desmond MacRae

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  • A Step Closer to Global STP

Is the Struggle for Faster Processing Over?

Has someone found the silver bullet for instant global trade execution and processing?

Some trading pros apparently think so.

They are introducing GeoTrades, a system that its earnest promoters claim could chart an historic course for industry pros struggling to establish so-called straight-through processing.

GeoTrades, scheduled for rollout early in the New Year, will be operated by a new independent broker dealer called AXES, which is targeting U.S. broker dealers. These are firms with retail and institutional customers who want to buy and sell securities and settle trades in non-U.S. markets.

"GeoTrades will supply the exact same information to all parties - the buyer, the seller, the brokers and the custodians - through every step, from initial execution through settlement, and finally to delivery," said Peter Eisenberger, an AXES director.

AXES was formed by vendor Cross Border Exchange Corp., or Crossbordex, and Auerbach Grayson, a New York-based institutional agency broker dealer with correspondent relationships in some 80 overseas brokerages.

Crossbordex developed GeoTrades. The cost to AXES customers will be packaged into the commission charges. Meanwhile, NASD approval is pending for AXES.

The new platform is designed to interface with PCs that have Internet access to AXES, which is a trade name. GeoTrades, which will clear through the Bank of New York, is a rules-based trading system that creates order trails to facilitate cross-border trading.

Despite the high hopes, simultaneously providing identical trade information is not new. For instance, another system, Omiris, which operates out of London, has a platform similar to GeoTrades. Indeed, Auerbach Grayson has entered an agreement with it. But if AXES begins operations as planned in the first quarter of 2003, it could ratchet up a customer base of 83 brokers that are in Auerbach's global network. (About 50 of these have entered the AXES agreement so far).

This could be the broadest application of global straight-through processing ever seen, according to GeoTrades executives. It could advance the goals of the Global Straight Through Processing Association (GSTPA), some industry officials say. (The GSTPA is an international association of investment managers, broker dealers and global custodians that tackle the major challenges of global clearance and settlement.)

"Capturing all the details of a trade for everybody involved is where it all starts," said Timothy Lind, a financial technology senior analyst at The TowerGroup in Needham, Massachusetts. "With an 83-country network, [GeoTrades] could have a global-straight-through-processing model that will interest the upper echelons of buyside firms," Lind added.

Will it work? Auerbach Grayson has been providing global clearance and settlement services by telephone and fax for a decade. So why suddenly all the excitement? "AXES is a multilateral complement to our voice operations," said David Grayson, AXES' director and a managing director of Auerbach Grayson.

Multiple Custodians

The march towards global straight through processing has been difficult. There is the problem of multiple custodians for institutional investors. For another, there is standardization. The SWIFT 1SO15022 message series required all parties to specify settlement location.