High Operational Performance Continues to Win Business for Brokers as Investment Managers and Hedge Funds Focus on Straight Through Processing (STP)

6 December 2006

“Increasing numbers of Investment Managers and Hedge Funds are rewarding Brokers with additional business based on excellence in Operational/Back-Office Performance”, reports a new survey by Z/Yen, the London based market intelligence firm. “Errors in post-trade processing are no longer tolerated as the Buy-Side focuses on Straight Through Processing.”

It is clear that as demands grow from the Investment Management community that the Brokers are responding with better levels of service and more focused customer offerings. Z/Yen asked 182 clients to rank the leading brokers on their Operational Performance and Client Service offerings:

In Europe, the results were as follows:
• ABN AMRO - Best 2006 European Broker for Equities Operations
• Morgan Stanley - Best 2006 European Broker for Fixed Income Operations

In the US:
• Morgan Stanley - Best 2006 US Broker for Equities Operations
• Morgan Stanley - Best 2006 US Broker for Fixed Income Operations for the 3rd year.

In Asia:
• Morgan Stanley - Best 2006 Asia Broker for Equities Operations for the 2nd year
• UBS - Best 2006 Asia Broker for Fixed Income Operations

Rhys Thomas, European Head of Client Services at ABN AMRO said, "We recognise that the provision of excellent Core Processing and Client Management services is vitally important to our clients."

Cynthia Chow-Coster, Managing Director of Multi-Asset Client Service at Morgan Stanley, said "Cross asset class servicing, relationship management, and operational excellence are areas that are increasingly key to our clients. Significant focus in each will have a commensurate impact on relative operational success. These themes will also ring true more broadly in our industry as volumes and complexity continue to increase and further challenge STP. Building partnerships to achieve common solutions is the critical success factor."

The Buy-Side is also becoming more scientific both in its use of technology and in its ranking of Broker Performance.

• Usage of OMGEO CTM, FIX and SWIFT for Confirmations are all increasing as Investment Managers move towards Straight Through Processing;
• 83% of Investment Managers worldwide, who rank their Brokers, now base these rankings on formal objective statistics on confirmation timing and accuracy and fail rates.

The ability to use technology to meaningfully rank Brokers on Operational Performance also allows Clients to penalise those Brokers who fail to make the grade. In 2006, 29% of IMs have reduced or suspended business with a Broker for poor Operational Performance.

Z/Yen surveyed 182 leading Investment Managers and Hedge Funds in 20 countries during September and October 2006. The survey was commissioned by 13 leading Brokers, to help prioritise their customer service needs and to independently assess the views of their Clients.

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