The Global Straight Through Processing Association - an industry-backed body charged with devising a model for processing cross-border securities trades - has released details of its pricing structure and says it is ready to begin pilot testing with 33 financial institutions.
John Gubert, HSBC, chairman of GSTP’s Tariff and Pricing Committee (TPC), which developed the pricing structure, comments: "The TPC’s aim was to keep the pricing structure simple and to minimise the cost of a basic trade match for all users. We believe that this pricing structure has fulfilled the promise originally made to the industry by providing attractive rates for all players in the market. In particular, investment managers will be encouraged to take advantage of a transaction cost of only 10 eurocents per allocation."
In pitching its pricing in favour of investment managers, GSTP is taking a pre-emptive swipe at Omgeo, a joint venture established by Thomson Financial and the Depository Trust Corporation, which is preparing to launch a rival service. Omgeo is well represented among investment managers and brokerages.
Arthur Barton, chief administrative officer, Clay Finlay comments: "The GSTP model has become even more attractive to investment management firms with the publication of the pricing tariff, and all firms operating in the cross border space should look closely at the substantial operating savings that GSTP will bring over their current costs."
The GSTP says it will trial the system in the next few weeks with 11 investment managers, 11 global custodians and 11 broker/dealers processing cross-border trades. The live service will be introduced by end 2001 and comprises a centralised Transaction Flow Manager (TFM), access modules and services developed by the axion4 vendor consortium, comprising SIS SegaInterSettle, Swift and TKS-Teknosoft.
The GSTP quotes a pricing example based on the notice of execution message (NOE) and specific allocation-related information sent to and generated by the TFM during the matching process. Assuming four allocations to a basic trade, the average charge per allocation will be EUR2.15, with the investment manager paying EUR 0.10, the global custodian EUR0.85 and the broker/dealer EUR 1.20. Assuming 20 allocations to a basic trade, the average charge per allocation will be EUR 1.95, lowering the broker's fee to EUR1.00.
The annual charge for the different types of software to access the TFM starts at EUR5000.
Steve Crosby, acting chief executive officer of GSTP says: "As an industry utility our approach to pricing reflects our core value of providing high quality service without commercial profit motivation.”