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Omgeo Wins SEC Approval for TradeSuite E-Confirms

Post-trade communications provider Omgeo announced Monday that it has received a no-action letter from the Securities and Exchange Commission that will let broker-dealer clients of Omgeo TradeSuite eliminate paper-based disclosures associated with trade confirmations.

According to the SEC letter, issued March 12, TradeSuite allows brokers to meet their Rule 10b-10 requirements by providing online access to information that brokerages typically include on the back of a paper-based trade confirmation. Rule 10b-10 mandates that brokers disclose to customers key details of a transaction in writing before it can be considered legally binding.

“The Omgeo electronic confirmation leverages electronic media for confirm disclosure and eliminates an inefficient paper delivery process,” said Steve Kelly, VP of operations at Goldman Sachs and co-chair of Omgeo’s working group for the confirm disclosure initiative. “This solution is in our clients’ best interests and will greatly benefit the industry.”

TradeSuite received SEC approval to provide electronic confirmations in 1983--when it was known as ID and operated by the Depository Trust & Clearing Corp. (DTCC)--but the information it provided did not meet all 10-b10 requirements. “Broker-dealers still include disclosure and disclaimer information on the back of their paper confirmations and TradeSuite didn’t have a sufficient number of fields to accommodate the extra information,” said Lee Cutrone, managing director of industry relations for Omgeo.

When Omgeo was created in 2001 as a joint venture of DTCC and Thomson Financial, it inherited ID and renamed it TradeSuite. The service is used by about 3,000 broker-dealers, including clients of correspondent clearing firms, to confirm 1.5 million transactions daily.

“Many broker-dealers continue to send paper confirmations to their institutional customers,” explained Omgeo general counsel Norman Reed in a March 11 letter to the SEC requesting no-action relief. “They do this because these broker-dealers have historically placed many of the disclosures that Rule 10b-10 requires, particularly with regard to fixed-income transactions, on the back-of paper confirmations.”

Although brokers will be charged an undisclosed fee to use the upgraded TradeSuite, Cutrone pointed out that they will no longer need to issue paper confirmations, which will result in significant savings.

Brokers using TradeSuite will enter the information required under Rule 10b10 into a database; every confirmation issued through the service will include a URL that customers can click to view the data. The confirmation message will be linked to the appropriate disclosures for particular trades, and customers will be able to view and print the disclosures. Currently, broker-dealers’ clients must opt out of receiving paper-based communications in order to receive electronic confirmations.

TradeSuite already discloses key transaction data required under 10b-10 such as trade date, identity of the security, price, number of shares, units or principal amount, commission, and time of the transaction. Although TradeSuite allows clients to include information in free-format text fields, the SEC requested that dedicated data fields be added--many accommodate fixed-income trades, which have different attributes from equities.

That new data includes mixed capacity--whether the broker acts as both agent and principal in a block trade--any third-party remuneration received, markup or markdown, current yield, yield to maturity and yield to call. More than 50 fields will be added, said Cutrone, and they will also provide for repurchase agreements.

The SEC in December 2006 gave Omgeo approval to eliminate paper disclosures on its Central Trade Manager system. In July 2007, the commission granted no-action relief to SunGard Institutional Brokerage, permitting brokers using SunGard Transaction Network to fulfill their Rule 10b-10 requirements through electronic confirmations.

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