September launch for TFM
So, after weeks of increasingly fevered speculation, it is now confirmed. The much-hyped launch of the Transaction Flow Manager (TFM) – the virtual matching (VMU) utility at the heart of the Global Straight-Through Processing Association’s solution to streamline the flow of trade data and reduce costs and risk within the securities processing chain – has been put back until September of this year. In addition, it would appear that axion4gstp, the vendor consortium tasked with building and testing the TFM, has been removed from the equation amidst suggestions that axion4 partner SIS SegaInterSettle is to be replaced as TFM operator by SunGard Data Systems, which has been piecing together its own global STP solution to compete with both the TFM and the Central Trade Manager (CTM), the rival VMU being built by Omgeo.
It was originally understood that the TFM would be up and running by the end of 2001; by late last year, however, that deadline had been pushed back to some undefined point in Q1 2002. April 1 duly rolled around and with no announcement of a confirmed launch date forthcoming.
But now we know. With the development and testing phases now said to be complete, GSTP AG the operating company set up by GSTPA, has assumed direct responsibility for the operation of the utility with a view to entering into what it terms ‘direct relationships’ with existing and new service providers. SWIFT, the second of the three axion4 partner firms, will continue to act as exclusive provider of messaging services to GSTP AG and its users. However, it would appear it is no longer fronting sales and marketing. The third member of the JV triumvirate, TKS-Teknosoft SA/TATA Consultancy Services, is now expected to concentrate on providing front-end technology for accessing the TFM. Indeed, the firm is already working with at least one major custodian bank that will begin offering so-called ‘concentrator’ services – whereby those firms that do not wish, or cannot afford, to establish a direct link with the two main VMUs can access them via a third-party gateway provider – once the TFM is up and running.
Newly installed CEO of GSTP AG, Juergen Marziniak says: “axion4 has fulfilled its task of developing the GSTP solution. The restructuring provides an outstanding opportunity for a powerful launch of GSTP AG by linking concentrators and participants’ communities.” All of which suggests that things have pretty much gone to plan.
But does the delay come down to a need to do more testing? Or is it the case that institutions, fund managers in particular, are simply not suitably prepared for the technological challenges posed by the adoption of this new automated solution? Are the concentrators’ services not ready, or have they yet to sign up sufficient clients willing to use those services? What does the removal of the axion4 consortium, as an entity in and of itself, say about the initial vendor selection process – and who mandated GSTP AG to effectively take over the project management and co-ordination role?
“Has the TFM been alpha, beta, user acceptance and parallel tested?” says one source with many years experience in the STP sphere. “Yes to all but the last one. Everyone knows TFM works, but many people are now wrestling with the fact that they don’t know what that really means.” The TFM was conceived as a central matching utility linked to the back office systems of the higher volume securities industry players, and therein lies the rub: “The TFM, the network, the test engine, all have come up roses – so long as you are sitting in front of single or multi user workstations. What hasn’t been tested is integration with existing back office systems – and so you could legitimately argue that the GSTPA vision has not been tested.”
It could also be argued that GSTP AG and axion4 have done everything they said they would – but that the very institutions which stumped up millions for the TFM’s development in the first place have been slow to update their back office integration systems, thus making it difficult to prove that the TFM, and their integration solutions to it, are indeed a robust end-to-end solution for global STP. The number of institutions that have reached their ‘end state’ – be it using in-house builds or via implementation of third-party solutions – and are thus ready to go live, is described by one observer as “embarrassingly small”. Similarly, no concentrators are yet were they need to be. “The feeling is that GSTP AG have given everyone an extra five months to get ready – by September it is expected that a representative number of broker-dealers, custodians and other institutions will be ready,” the observer added.
However, this new timeline may be threatened should, as rumoured, SunGard take over the reins from a banished SIS SegaInterSettle. SunGard is many things, but based in Switzerland is not one of them, and if it were to step up to the plate, one might reasonably expect the centre of TFM operations to move from Zurich to the US. When contacted, SunGard came swiftly to the point: “No comment”. Omgeo, meanwhile, have confirmed that the CTM is still on schedule to go live by the end of the second quarter of this year.