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GSTPA To Dissolve
Shareholders of the Global Straight Through Processing Association, focused on providing central matching of trade details between investment mangers, broker-dealers and global custodians, vote to dissolve the business.
November 22, 2002
4 Min Read
The Global Straight Through Processing Association, an industry utility conceived, funded, and developed during the boom times of the late 1990s, says its shareholders have voted to suspend operations and dissolve the business.
The GSTPA went live Sept. 9, but weak commitment from investment mangers, combined with an unwillingness on the part of shareholders to kick in more funding, left the utility with little chance of survival, CEO Jurgen Marziniak says. "There was a floor in terms of the number of allocations that were necessary, and that floor wasn't reached."
The GSTPA was focused on providing central matching of trade details between investment mangers, broker-dealers, and global custodians.
Marziniak says he advised the board to continue operations and is "disappointed and embarrassed" that the GSTPA will close its doors. "There is just no business," he says. "We built a very beautiful machine, a nice car that nobody wants to buy."
When asked about the reasons for the GSTPA's demise, industry insiders mention things such as the removal of a T+1 mandate, the economy, and last year's terrorist attacks, but never a problem with the actual software.
Theresa Parker, senior VP in the worldwide operations and technology group with Northern Trust, a large global custodian, says GSTPA's Transaction Flow Manager is a very strong piece of software. "For trades where we were automatically connected with our counterparties, confirmation took place within six minutes," she says.
Parker says Northern Trust sank about 5 million euros into the GSTPA, which, she says, is part of the cost of doing business as a custodian. "The circumstances have changed so much since its inception, ... I don't think it was a mistake at the time."
Dan Stroot, chief technology officer for investment manager Nichols Applegate, says his firm intended to use Transaction Flow Manager, but a bad economy got in the way.
"We had done the majority of the plumbing work to put [connectivity to the software] in, but we decided, based on the economy and the fact that we didn't see others moving in the same direction, to move it down in priority," Stroot says. Ultimately, Nicholas Applegate never went live on the Transaction Flow Manager, he says, opting instead to concentrate on its implementation of a new portfolio-management system.
Tim Lind, a senior analyst with TowerGroup, says GSTPA was set up to deliver a piece of software, rather than to run a business. Functions such as sales and marketing, which are integral parts of any business, seemed to be afterthoughts in the GSTPA model. GSTPA rival Omgeo LLC, however, "has always looked at matching as a business and not a software device," Lind says.
Though its main competitor has just closed up shop, the news may not be completely positive for Omgeo. "The GSTPA's demise demonstrates a potential lack of overall enthusiasm for central matching, which means it is unclear whether Omgeo will get its return on investment for [Central Trade Manager]--will it be able to convince buy-side firms to make incremental investments using CTM?" Lind asks.
In terms of embracing Omgeo's Central Trade Manager, Stroot says he will stick with Oasys and Oasys Global for now. "Omgeo has the same problem as GSTPA in that it's hard to justify the investment of migration right now," he says. "Investment mangers are in a bunker mentality."
Additionally, Stroot says he wants to keep a close eye on Omgeo's pricing now that it's the only central-matching game in town. "Our concern with the for-profit model is that we don't want a monopoly-for-profit entity."
Tom Perna, senior executive VP at the Bank of New York, a longtime GSTPA shareholder, says that from quite early on the utility had little chance of success.
"Once the project started, there were personality issues and a lot of individual self-interest on a number of parties getting into politics. It just became a flawed project that was doomed to fail. It is unfortunate that the industry had to spend $100 million in hard cash," Perna says.
The only winners, Perna says, were the consultants.
Marziniak says the possibility exists that a company such as Omgeo, SunGard, or IBM could now buy Transaction Flow Manager for almost no money. But GSTPA failed for a specific reason, he says. "For me, it's clear that if the industry players don't want to use it then why would anyone want to come in and buy it? There is just no business case."
Looking back, Marziniak says that he "came into the GSTPA as the captain of a ship in trouble" and did the best he could to straighten that ship out. Now, he says, he feels like the "captain of a sunken ship."
"If there are people interested in calling me with their condolences, that's one thing," Marziniak says, "but if they are interested in giving me a call and offering me a good job, then I would look at that very seriously."
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