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IPE special report May 2018

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AP3 plans IT upgrade to improve STP

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  • AP3 plans IT upgrade to improve STP

SWEDEN - Tredje AP-fonden (AP3), the third Swedish national pension fund, is seeking a supplier of an Order/Execution Management System (OEMS) to improve efficiency and reduce risks.

AP3 does not currently have an OEMS, instead the portfolio management system, or book-keeping system, used by the front office, back office, middle office and accounting is Wallstreet Suite (WSS).

It revealed while trades on its fixed income and foreign exchange portfolios are automatically logged onto the WSS system, its IT structure does not support the interaction between applications used by the equity traders' execution desk, in both cash and derivatives, and with the WSS so these trades have to be entered manually.

As a result, AP3 said it is seeking an OEMS provider in an attempt to "increase straight-through processing (STP) in our trading and booking processes and as a consequence increase efficiency and reduce our operational risks".

In particular, it hopes the introduction of an OEMS system would:

Save time for the execution team by increasing electronic order routing and reducing manual input into WSS; Decrease the operational risks associated with manual registration in WSS; Decrease the number of trades booked in error, which would save time for back-office staff; Reduce the risk of misinterpretation in the communication between portfolio managers and execution team; Improve the trading with algorithms and electronic program trading; Improve the audit trail from a compliance perspective; Allocate orders more efficiently to different brokers; Decrease the number of trading applications used by different groups at AP3 - leading to application cost and educational synergies, and Improve trading transparency and order information through better online order status.

The contract, valued at €600,000, will last for an initial period of three years but with the option of a further extension, and the successful provider will be expected to produce a "multi-asset and instrument class" and "multi-broker" OEMS.

This means the system must be able to handle cash equities (stocks), equity index futures and fixed income futures, and it must provide several broker alternatives for the markets specified in the contract, including Eurex, LIFFE, OMX/EDX and Globex for derivatives.

Other issues, such as interface requirements and pricing models, are also outlined in the tender notice, as AP3 admitted "our requirements are demanding and that perhaps no single off-the-shelf product might meet all the requirements".

It confirmed: "If AP3 does not find a supplier with the ability to implement a satisfactory and efficient solution, AP3 might reject all proposals. It is also possible that AP3 might choose a supplier's solution to a specific part if the solution is deemed to be particularly good for that area. The solution can therefore be a combination of buying an existing system and adapting our own systems."

The closing date for applications is 16 March 2009, and it is expected a provider will be appointed by May 2009 "at the latest". Further information can be obtained from AP3.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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