Buy Side Faces Post-Trade Crunch11.21.2011
Multiple custodial relationships magnify trade settlement and other tasks.
The buy side is facing a crunch in middle-office processing tasks such as trade settlement, matching, and reconciliation, at a time when industry groups have initiatives underway to address some of them.
“Investment managers typically have multiple custodians which create complexity,” Ian Danic, managing director at Electra Information Systems, told markets Media. “This is increased with a broader range of asset classes and multiple currencies. The investment manager is required to maintain accurate records and communicate with multiple parties.”
Electra helps to reduce the burden of these requirements while increasing the accuracy and timeliness of internal information and external communication, Danic said.
“Electra’s focus is exclusively on the specific needs and requirements of the buy side workflow,” said Danic. “Our staff come from buy-side organizations and offers a great depth of knowledge of clients’ workflow requirements. This experience and the company’s specific focus make for efficient and cost-effective implementation of our solutions.”
Electra has over 200 clients in 13 countries, many of them operating multinationally.
“There are a number of global issues associated with post-trade processing, including the wide variety of local market practices and the lack of global standards,” said Danic.
Another example is where data is being made available in multiple time zones – for example, a U.S. client could have a custodian in Hong Kong. Electra’s solutions operate across these time zones and don’t require manual oversight from the client. “Our solutions are flexible, rules-based and adaptable to local practices,” said Danic.
Post-trade operations play a key role in reducing settlement failures.
Omgeo provides a central trade matching (CTM) service, which enables trades to be matched in real time, thereby boosting same-day affirmation (SDA) rates.
The European Commission’s consultation on harmonization of securities settlement recommends establishing common EU rules on settlement discipline, including early matching of settlement instructions.
This year, ISITC (International Securities Association for Institutional Trade Communication), released updated Market Practice for Standing Settlement Instructions (SSIs) associated with cash and FX instruments. This best practices document aims to provide investment managers, brokers and custodians with a consistent standard for exchanging SSIs between parties in order to improve automation and efficiency across the industry.
Electra participates with the industry, particularly as a board member of ISITC and as partners with SWIFT and Omgeo, to examine the challenges and to support the changes that need to be made, said Danic.
Electra is SWIFT compliant and implements the recommendations of the Standard Markets Practice Group (SMPG). “In the current environment of regulation, Electra’s solutions increase control for the investment manager and make information more accessible,” Danic said.
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