Reference Data Utility Overview

October 2016
 Transforming the Financial Services Industry through mutualisation

SmartStreams strategy is to help financial services firms save $100b in processing costs by shutting down
internal legacy processes and mutualize their trade processing and data management functions

SmartStream has 1,500 customers / 200,000 users

29 of the worlds top 30 banks

Three major Utilities are industry first, with no competition

today or in the mid-term
Reference Data Utility / SPReD with Goldman Sachs, JP
Morgan and Morgan Stanley
Reconciliation Utility Newedge, Credit Suisse, JPM,
Citi, BNYM, State Street, DB, etc.
Fees & Invoicing Utility Deutsche Bank, Credit Suisse,
SocGen, Newedge, BNP

Core technology provider for:

ESMA Reporting Utility DTCC DerivServ

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Top tier Financial Industry participants

Regulatory
Reporting

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SmartStream Solutions

Trading

Cash &Liquidity

Contract Setup Margin Call

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 Trade and Operational Control Framework

Pre-trade Execution Post-trade

Risk
Pricing Compliance Block Allocation Confirmation Advice Instruction Settlement
Monitoring

Block Allocation Confirmation (Advice) Instruction Settlement

Reconciliations Rec Rec Rec Rec Rec
Control
Inter-systems & FOBO Rec

Centralised Exception Management

Data Instrument details Execution Trade static

Control Market symbology Static Internal symbology

Broker fee Broker & Confirm venue static

Process
optimisation Counterparty Clearing static
Control
Static Counterparty symbology

Pre-emptive data & process enrichment

Operational & Collateral Eligibility Funding & Liquidity Risk

Funding Control
Position Control

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 Principles of continuous improvement and optimisation

Continuous
Service
Improvement
Pre-trade Post-trade
Business Flow
Optimisation

Pre-emptive:
Proactively fix reference data to represent the market truth to
promote STP through the trade life cycle
Provide complete coverage of all instruments and new issues to
enable the ability to trade
Optimize use of collateral
Facilitate a view to the desk of applicable rates and discounts
based on current volumes to reduce cost of trade
Root Cause Analysis:
Monitor and apply industry and regulatory changes to rule sets
and data models across all solutions
Manage the client feedback loop to address common data and
processing issues
Control:
Action-based calendar for review and monitoring of
Corporate Actions processing
Cash and liquidity management gives intraday view into
flows
TLM Premium adds an operational risk frame work
Apply enterprise wide data governance standards
Provide insight into the optimization of collateral and
margining
Centralized management of exceptions
Reporting:
KPI feedback loop to the desk, ops, IT, Finance
Data integrity across business and regulatory reporting
All-in trade processing costs and fine-grained cost
allocation

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 Financial Services: a $100b cost over-run problem*

All firms will need to take drastic action on the cost side, exploring which activities are not differentiated
and considering utilities, shared services, and agreements to mutualize costs.

Capital markets revenues have dropped by $100b

since 2009; industry operating profits are at
historical lows across the board, down 28 percent
since 2010 to just $68 billion in 2014. Revenues
declined, although costs did not. Banks have
seemingly reached an impasse of sorts, with the
industrys cost-to-income ratio (CIR) stubbornly
remaining above 70 percent. The industry gloom that
we have been forecasting for some time is now well
and truly upon us.

*BCG - Global Capital Markets 2015: Adapting to Digital Advances

DTCC Confidential (Yellow) Confidential Treatment Requested by DTCC/DTC/NSCC/FICC

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 Key trend: mutualization through utilities

Money managers have externalized ALL their back-office and fund admin functions in the last 15 years.
Beneficiaries: custody banks, fund administrators 9 of top 10 are clients of SmartStream

Exchanges and Banks have let $30b of revenues leak out to Bloomberg, Thomson Reuters, etc., and they
are doing everything to recapture a slice of that business: e.g. ICE bought IDC (data revenues went from
$.8b to $1.8b).
Beneficiaries: Markit, SPReD, ICE

Clearing Houses are offering next gen utilities such as DerivServ, Clarient, Acadiasoft

Banks must drastically reduce their IT and Operations costs, $100b wasted every year. As internal re-
tooling wont work and ROE is not there, Banks are now in the process of mutualizing their back-office,
one function/service at a time.
Beneficiaries: Clarient, Acadiasoft, RDU/SPReD, Symphony, Fees Management Utility

There is an immediate potential to mutualize other functions:

cash, liquidity and collateral management

network management
clearing & settlement
regulatory reporting and compliance
tax processing & compliance

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 Market trends and industry end state

Market Driven

Front Office:
Trading
Order Management
Investment Decision Making

Data Management: Risk Management:

Legal Entity Market
Security Regulatory Credit
Price Liquidity
Corporate Actions
Reporting
Collateral:
Margining Tax
Optimisation Industrialise Centralise Localise
Standardised Differentiated
Finance:
Fees Processing Reconciliations
Treasury
Back Office Processing: Strategic Planning
Balance Sheet
Confirmation & Affirmation Processing Substantiation
Clearing & Settlement Relationship
Accounting Cash &
Management
Liquidity
Management
Compliance
Monitoring

Product Control

Client/Internally
Driven

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 Post-Trade Processing: evolving landscape
Competitors

ICE / IDC SEI APTP

Front-Back Coverage
FIS/Sungard
SS&C (Globe Op/Advent)
Custody, back-office
outsourcing/Fund Admin:

Misys

Citco
State Street, BNY, JPM,
NT, HSBC

BlackRock Solutions

Fiserv
Ion-WSS
Thomson Reuters
Breadth of Solutions

Suite of Products

Fidessa SimCorp

Murex

Wolters Kluwer
Calypso
Dimension
BBH Infomediary
SPReD / RDU

Markit
Bloomberg


Charles River DTCC DerivServ TLM Fees

Linedata

DST Global Solutions
NRI
ICAP

NASDAQ
Broadridge

Multifonds (Temenos) Core One (Markit)
Single Point Products

Eagle (SST)

Statpro
DTCC Clarient

Symphony

Vermeg AcadiaSoft

BI-SAM

Asset Control
Golden Source

Sungard XSP
Fidelity ActionsXchange

On Premise Utility/BPO
Traditional SaaS
Shared
Offering
Offerings Services
Delivery Options

Key: Buyside Sell-Side

Both
Strategic
Direction
Source: Cambrian Consulting
Tech > 30 years SmartStream SmartStream
old Utility Clients

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Reference Data Utility

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 Core Operating Principles of the Utility

The RDU serves as a processing agent for the clients data feed subscriptions

The clients maintain control over contractual and business relationships with their data suppliers

The RDU does not comingle or compare data sources; it does not use one vendors data to cleanse
another
To manage data, it normalizes data across sources so it can provide consistent business and
data quality rules to manage data. Validation sources, including corporate actions and
holiday calendars, are self sourced by the RDU

SmartStream will assume operational responsibilities that can be mutualized across the banks
with the goal of reducing operational costs

This includes tasks such as manually enriching data not supported by data subscriptions

Validating data prior to market open to ensure it is updated to support trading

Monitoring corporate action events to ensure securities are updated for events on the
effective date

Proactively performing data quality checks

Manually supporting new issuance and IPO data

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RDU Architecture

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 IVO Intelligent Vendor Override

n Source Value Stored in Table n Distribution of Client Specific Value / OPS

value / Original Source Value
n Shadow Records Created For
n Crucial Capability For Providing a Truly Multi-
o Programmatic change
tenanted System
o Manual change by RDU OPS
o Client
specific change with four-eyes
approval

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 Configurable Subscriptions and Profiles

Subscriptions Define the Securities Of Interest as

a Combination of Filter Criteria
Profiles Select the Fields and Rule Based Data
Source Hierarchy
Based on availability of field
Majority, average, aggregation
Cleansed vendor value, original
vendor value, SST value
Client values, lookups, custom logic

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Client Distribution

Distribution Methods Supported

Messaging
Request Reply
On Demand
Delta Files / Full Refreshes

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 Service Scope

Data Acquisition Operating Model

Support for Start of Day trading

Act as a Transaction Processing Agent
24 x 7 Level 1 and Level 2 support
Direct Exchange Feeds
Support an Exception Management System
Vendor Consolidate Feeds
that integrates with banks
Manually enrich and derive data
Compliant with bank risk and operating
Support IPOs and New Issuance setups
procedures
Data On-Boarding Distribution

Normalization across sources to a common Flexible distribution protocols batch,

vocabulary messages, on-demand, request reply
Cross reference industry, vendor and Golden copy creation
exchange symbology
Support Bank Identifiers BPO Services

Data Quality Manage Security Masters as a BPO Service

Content
Validation and cleansing of data
Monitoring for corporate actions and Equities
holidays Exchange Listed Derivatives
Over ride data for updates and corrections Fixed Income Products and Ratings
Guarantee data Structure Products
Legal Entity Data required to support
securities and ratings data
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 RDU Utility Model Benefits

Shared processing and benefit

Support shared processing of data perform a data management task once and allow all
clients to benefit

Standardization
Subscribe to data from multiple market data vendors, exchanges, issuers, etc. and present the
content in a common taxonomy and vocabulary
Standard taxonomy improves banks time to market in on-boarding new sources of data

Complexity
The Utility manages the complexity in normalization data across sources including cross
reference between a clients internal IDs, exchange symbology and industry symbology

Sourcing Flexibility
The utility model allows clients flexibility to choose its own sources. The utility acts as a
processing agent for the clients data subscriptions

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