Integrating the DMS with systems related to the auction platform for domestic securities, usually operated by central banks, can also generate advantages. In many countries, the central bank conducts domestic debt auctions and keeps the debt registry in its role as the government’s agent. Connecting the DMS with the central bank’s securities auction and trading system, with an interface to the registry system, keeps operational risk at a minimum and cuts processing times. For countries that aim to develop their secondary market environment and at the same time achieve pre-trade transparency, an electronic platform can be used for the issuance of government securities.

For a DMO undertaking more complex transactions, having an IT system that can interact with the country’s larger financial infrastructure can also deliver benefits. For example, countries like Denmark, Hungary and Sweden use derivatives to manage the risk exposure of their debt portfolio and usually deploy collateral to back these operations. DMS integration can allow it to capture the derivative transaction and information from the collateral management system, which is sometimes run internally or through a custodian. Countries that set up repo/reverse repo or securities lending facilities also benefit when their DMS can interact with the systems used by capital market actors.

# **Straight Through Processing**

STP from front office to deal capture to back office settlement is another highly-recommended characteristic for a DMS. This allows for automatic settlement, payment, and registry of any payment in the DMS once the various actors in the chain complete its processing. In other words, the transaction flow principle enables a single data entry and modification point for transactions. The method for transmitting payment notices to the Treasury and then consequently to the payment agent (usually the central bank) for the actual settlement/repayment can be manual. However, by minimizing human interventions, STP reduces operational risk. Figure 2 presents a simplified illustration of the information flow and transactions for a DMO. All of these activities can be captured through an STP.

# **IV. Selection and Implementation of a DMS**

When it comes to a DMS, debt managers often debate whether it is better to purchase an off-theshelf solution or build their own software to achieve their objectives. Both approaches have pros and cons (See Table 3: ). The answer depends mostly on the complexity of a DMO’s operations and its available resources. At a minimum, making the right decision requires that the DMO have a solid understanding of its current and future business needs.

When evaluating the suitability of a DMS, the key parameters are the same as those for users of any IT system. First and foremost, the software package should capture most of the needs of the business and its users. Relevant factors also include cost, ease of installation and maintenance, sustainability, availability of training, and technology risk management capacity.<sup>10</sup>

> 10 Technology risks consist of: i) software bugs, ii) over-customization, iii) hardware failure, iv) vendor dependence, v) key person risk, vi) business continuity, vii) hackers, and viii) rapidly evolving technology.

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