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DTCC completes managed accounts service testing; plans Q1 launch

10 January 2008  |  1739 views  |  0 Source: Depository Trust & Clearing Corporation

The Depository Trust & Clearing Corporation (DTCC) today announced that two of Citi's businesses have successfully completed end-to-end testing of the initial phase of DTCC's new Managed Accounts Service (MAS).

Reaching this point now positions the service for an industry-wide launch in the first quarter of 2008. The two Citi businesses that have completed end-to-end testing of the service are Smith Barney and Global Transaction Services.

Assets under management for managed accounts - which include separately managed accounts, unified managed accounts, dual-contract and multi-disciplined portfolios - are projected to reach $1.5 trillion by 2011. This growth is attributable to an expanding market of high-net-worth households and 78 million baby boomers who are seeking personalized investment portfolios that preserve capital accumulation and minimize the impact of taxes.

DTCC's automated, centralized platform will streamline communications among investment managers, sponsors and service providers. By using DTCC's safe and secure SMART technology network to transmit information, the service will mitigate the risks associated with opening and maintaining managed accounts.

"This is a high-water mark in our goal to create a platform that simplifies and standardizes all the processes in the life of an account, in much the same way as our processing solutions for the equities, mutual fund and over-the-counter derivatives industries," said Ann Bergin, managing director and general manager, DTCC Wealth Management Services. "We are extremely pleased to have made such progress with Smith Barney, the leading sponsor, and Citi's Global Transaction Services, the leading service provider, as our partners."

Launching the Managed Account Service
Smith Barney, a business within Citi Global Wealth Management, has nearly 30 percent of the managed account market, according to Cerulli Associates. Investment Administration Services, a unit of Citi's Global Transaction Services, has more than 30% of the managed account outsourcing market and provides operations services to investment managers with over 80,000 managed accounts and $160 billion in managed accounts assets. Citi's 's Investment Administration Services business played a dual role in the test - translating Smith Barney data to MAS and also receiving messages on behalf of its outsourcing clients. Both Citi businesses are charter participants in the service, which is being provided by DTCC Solutions LLC, a subsidiary of DTCC.

"As the largest sponsor of managed accounts in the U.S., Smith Barney continues leadership in the industry with commitment to this important project supported by DTCC's solid infrastructure. MAS will allow us to further expand our business by bringing greater efficiencies to our operations as well as our Investment Advisor partners, which will ultimately affect the end investor in positive ways," explained Dana J. Fowler, managing director, Smith Barney.

Chandresh Iyer, managing director and head of Citi's Investment Administration Services, said the new service would benefit the entire industry. "By facilitating connectivity to this central portal, we are able to provide the benefits of our comprehensive and innovative operational solutions to Smith Barney, other sponsors and investment managers across the investment industry, thereby enabling a new level of operational scalability."

Testing details
The initial test comprised several standardized messages (or schemas) to initiate and activate a new managed account between an investment manager and a sponsor; new-account funding; distributions, such as dividends and capital gains; and notification of account terminations.

Testing was completed with DTCC playing the role of investment manager. The next step will be to test MAS with major technology providers that provide front-end connectivity to the investment management community, and move it into full production.

Development strategy
DTCC will continue to expand the functionality of MAS throughout the next two years to support dual contracts, unified managed accounts and model-only products, all of which are becoming increasingly important in the managed account space.

DTCC is also looking to make the service interoperable with Fund/SERV, the mutual-fund industry's primary platform for processing transactions. It is provided by DTCC's National Securities Clearing Corporation subsidiary.

MMI-Compliant Messages
DTCC's MAS messages are fully compliant with industry standards of communication developed by the Money Management Institute (MMI), and DTCC staff worked closely with several MMI committees to ensure that the messages were compatible with MMI standards.

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