SFE Positioned To Take A Lead Role In Straight Through Processing (STP) & T+1 Settlement

SFE Corporation Limited today announced its intention to act as a 'concentrator' for both the Global Straight Through Processing Association (GSTPA) Task Flow Manager (TFM) service developed by the axion4 consortium, and Omgeo's Central Trade Manager (CTM) service. Omgeo is jointly owned by the Depository Trust & Clearing Corporation and Thomson Financial.

GSTPA and Omgeo have emerged as the two major global service providers facilitating 'straight through processing' (STP) for the various post-trade functions that take place before actual settlement of a security trade can occur. A 'concentrator' acts as a link between the individual market users and the service providers themselves.

SFE is the first financial markets service provider in the Asia Pacific region to reach such an agreement with both organisations. The initiative is in keeping with Australia's ranking as a leading provider of clearing and settlement services (GSCS Benchmarking Studies1) and reinforces it's positioning as a global financial centre.

Axiom4 and SFE have agreed to work together with the market to clarify the issues and processes required to make the TFM service available to SFE's customers. "The adoption of STP and the facilitation of T+1 settlement standards will require extensive market co-operation," commented Martin Stockley-Smith, General Manager of SFE Clearing, the clearing and settlement arm of SFE Corporation Limited. "The acceptance of global standards and a firm commitment to implementing full 'interoperability' between the services on offer is of paramount importance. The SFE wants to ensure it's customers are given the opportunity to achieve full STP efficiencies and realise the extensive cost and risk benefits that are the drivers for this market reform."

SFE Clearing in conjunction with its Austraclear operations provides extensive settlement services including central counterparty, central securities depository and cash settlement facilities to the Australian and New Zealand Debt Markets. Through its extensive customer base of over 600 companies and institutions and it's comprehensive network and technology platforms, SFE Clearing is uniquely placed to act as a focal point for the STP / T+1 program in Australia and New Zealand.

The commitment by the US to reduce settlement standards from the current T+3 and T+5 to T+1 (the day following the trade) by mid-2004, has resulted in an increasing focus on Straight Through Processing by financial institutions in most countries. It is thought that securities markets globally will follow the US lead to reduce trade settlement cycles, however the timing and degree of implementation is likely to be tiered by market user type. When achieved, a T+1 standard is expected to significantly reduce market risk and deliver extensive operational cost efficiencies. Full STP is a necessary pre-requisite to achieve this T+1 standard.

While extensive automation has occurred in the trading and settlement process the lack of full market STP in the post-trade activities has so far restricted the markets opportunities to achieve the full end-to-end efficiencies available. Implementation of the concentrator role is the next important phase in achieving full STP.

SFE is in the process of launching a series of market consultations designed to raise the market profile of the STP/T+1 challenge. These consultations will focus on user requirements and interoperability issues, provide an information service designed to keep market participants fully informed and consulted at each stage of the process, and to ensure effective and efficient solutions are developed and implemented.