The problems meant it was becoming ever harder to meet customer needs and, indeed, on occasions Daiwa was having to decline requests from customers. Opportunities were being missed because it was too slow to set up new business. Even if it was able to do so, it would have required a lot more people in the back office and this was not a route that Daiwa wanted to go. ‘It was a concern that as the business grew and as the products increased, it was becoming harder and harder to support this without increasing the headcount,’ said Muirhead. A study was done in 2001-2 involving a number of consultants, much internal discussion, and talks with a number of other relevant parties. There was a lot of debate about just replacing what the bank had but that wouldn’t have achieved anything fundamental or changed its operations. Instead, it embarked on ‘Project One’, selecting and then implementing a central counterparty database supported by workflow. The data layer, dubbed Radix by Daiwa, also supported all pricing, corporate actions and financial instrument data. There were feeds from Tokyo, as well as from Bloomberg and Telekurs. The central data repository was updated in real-time and changes were published via the Tibco middleware for the relevant front and back office systems. The middleware also handled the workflow so, for instance, controlled the processes around creating a new customer profile or account. Account opening was the first emphasis when the project started, constituting a ‘quick win’, with this automated for sub- accounts fed to the front and back office systems by Omgeo Alert and proving the capability of the framework for BPM. Daiwa completed tests for the addition of 500 new client sub- accounts in three hours – before the system was implemented, the limit was 15 to 20 per hour. The one issue uncovered was that the Alert data was not always accurate.


Account opening was followed by counterparty information. For this, there was the need to have everyone agree on the definition: what is a counterparty – a customer, issuer, custodian, bank account, all of the above? There was also the need to define ownership structures and to decide how deep to go. There had to be a decision on what associated data needed to be stored (employee, company structure, Standard Settlement Instructions, trading accounts and so on), what attributes were required (and under what circumstances), and what might be needed in the future. All rules needed to be identified in relation to the downstream systems. A one- off transformation system was written to take the data into


the consolidated ‘Gold Copy’ form, with the data cleansed (a lengthy, iterative process), followed by rigorous testing of the new environment. The cut-over from eight downstream systems to the consolidated form covered all of the data related to 12,000 client accounts, 35,000 settlement instructions, 5000 issuers, and 300 banks and custodians. The third stage of Project One was the instrument data. This was much less Daiwa-specific than the rest of the data. An analysis of the users concluded that Bloomberg should be the primary feed for all descriptive data and pricing, with Telekurs the primary feed for corporate actions and CFI codes. Bloomberg and Telekurs would back up each other. The Tokyo feed was to be used solely for all Japanese stocks and bonds data. Now, when a security changed on Bloomberg or Telekurs, the data on the downstream systems was updated in real-time.


The set-up supported various STP-type improvements, of which the main one was electronic trade confirmation (ETC). There were workflows associated with particular instruments, issuers, trading banks and scenarios. For instance, if Daiwa traded a new security, the Tibco middleware would check to see if it was already in the back office system. If it was not, that trade would be held on the Tibco layer, the data would be automatically loaded into the back office from Bloomberg or Telekurs, and only then would the trade be released for settlement. Similarly, if a particular issuer was not set up, then the trade was held until this had been done. Not only had Daiwa’s STP rates increased markedly (although a lack of measurement at the outset meant the improvement had not been quantified), but it was now also possible to study the flows. For instance, it could see how long it took to set up standing data whereas before this was purely anecdotal. The transparency meant Daiwa could see any issues, could refine the processes and could measure the results. ‘Project Two’ was to do with streamlining accounting and


financial reporting. The number of Access databases and Excel spreadsheets within the organisation was a symptom of the existing issues. ‘We want the finance department to be in control of how we account for our products,’ said Muirhead. Daiwa looked at a number of systems. It opted for Financial Architects because of the relative maturity of the product and the knowledge of the staff, with the latter particularly coming through during the proof of concept stage.


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