Omgeo, the global standard for post-trade efficiency, today announced that it has acquired Allustra, a London-based provider of collateral management solutions. Allustra offers a suite of products that provide customers the ability to consolidate trade positions across asset classes, including OTC derivatives, and to manage the collateral process that mitigates the associated counterparty risk. Mark James, managing director of Allustra, joins Omgeo’s executive committee as managing director.
In addition, Omgeo acquired a derivatives portfolio reconciliation platform designed by Global Electronic Market’s (GEM), after piloting the technology with one of the largest brokers/dealers and one of the most sophisticated hedge funds in the world. By joining GEM’s derivatives reconciliation capabilities with Allustra’s collateral management solution, Omgeo sets a new standard for the market as the only organization to provide clients such a combined derivatives product line.
"We are truly excited to extend our expertise in operations beyond matching and allocations," said Marianne Brown, president and CEO of Omgeo. "By acquiring Allustra, Omgeo can provide its community access to the leading collateral management solution available today. Combining this with GEM’s unique derivatives reconciliation technology means we are poised to truly change the way the industry manages counterparty risk."
Over the past five years, investment managers have dramatically increased the use of derivatives within their portfolio management strategies and, as a result, augmented the use of collateral to manage risk. Today, more than 2 trillion USD of cash and securities are being used to mitigate that risk. While trade strategies have become more sophisticated, the infrastructure to manage operational risk in the back office has not kept pace. Omgeo has successfully set the standard of efficiency for post-trade matching and allocations; with its combined derivatives reconciliation and collateral management offering, Omgeo is extending its operational expertise to automate post-settlement life cycle events.
"There is an urgent need for a standard, automated process for investment managers to reconcile derivative positions and confirm the movement of collateral," said John Devine, coo of Threadneedle Asset Management and a member of Omgeo’s Board of Managers. "The market sees Omgeo as the logical provider of a solution that combines both derivatives reconciliation and collateral management, as they truly understand the operational pain-points of the financial community."
Omgeo’s derivatives solution will automate processes that are predominantly manual, including reconciliation and dispute management (derivatives positions, mark-to-market values, payments amount and margin amounts), margin calculations, collateral inventory management and the collateralization process with counterparties. This combined approach will allow Omgeo’s clients to realize operational efficiency, reduce operational risk and more effectively manage their counterparty credit risks. The Omgeo derivatives offering will be available for all Omgeo clients, including hedge funds, investment managers, prime brokers, broker/dealers and custodians.
"We are thrilled to join the Omgeo community," said Mark James, managing director of Allustra. "Over the past seven years, we have strived for excellence in the collateral management space. By aligning with Omgeo, the market leader for providing operational stability in the post-trade world, and by continuing to partner closely with our clients we will keep developing the ground-breaking solutions required by the market."
"Given that our research in the market indicated a growing need for a centralized solution for reconciling portfolios of derivatives, we decided to combine our market-proven reconciliation technology with the Omgeo infrastructure to address this critical need. We have invested five years of research and development on addressing the unique problems of reconciling portfolios of derivatives and are excited about delivering that capability to the Omgeo community," said Brian Lynn, cto and founder of GEM.
Omgeo will continue to expand its derivatives suite of services. Next year, Omgeo Central Trade ManagerSM will offer functionality for exchange-traded derivatives. Other enhancements will also be made over the next several months.