09.26.2011
By Terry Flanagan

Trade Lifecycle Automation Gets Industry Boost

ISITC develops best practices to promote greater efficiency in trade processing.

Regulation and technology are coming together to formulate standards and best practices in financial markets.

Regulation and technology play very important roles in standards and best practices,” Gary Probert, chair of International Securities Association for Institutional Trade Communication (ISITC), told Markets Media. “As regulation has both short-term and long-term impacts from the front- to back-office, we look at how technology can enable organizations to comply with existing and potential regulatory mandates.”

ISITC brings together broker/dealers, custodians, investment managers, vendors and other industry professionals to develop proposed standards to enhance efficiencies in trade processing and related communications.

“Because ISITC is comprised of executives from both end user firms as well as the technology providers themselves, we are able to work collaboratively to understand how technology can support standards that guide firms towards compliance and efficiency,” said Probert.

ISITC works closely with different messaging standards such as FIX Protocol and SWIFT in order to identify how institutions across buy- and sell-side can utilize the different standards that bring better practices and straight-through-processing to the industry.

“ISITC is comprised of key constituents from organizations such as SWIFT, FIX and other messaging standards because their input is absolutely crucial to the work that we do in developing market practices and guidance for different asset classes and securities,” Probert said.

ISITC works to bring greater automation and efficiency to the trade lifecycle, including in the derivatives market. Part of its mission is to respond to industry regulation and develop best practices for all market constituents, and because of that ISITC has a number of Working Groups, including for derivatives, settlements and reconciliation.

A recent example of their work is the updated Market Practice for tri-party reverse repurchase agreement settlement and confirmation.

In partnership with the Asset Managers Forum (AMF), the ISITC Settlements Group updated the ‘tri-party repo’ guidelines in response to new reforms released by the Federal Reserve Bank of New York (FRBNY). These reforms introduce and strongly recommend the netting of tri-party reverse repo trades to reduce the number of intraday cash wires.

The Market Practice addresses the various netting scenarios presented by these guidelines, including single deal netting, multiple-deal single-broker netting, and multiple-deal multiple-broker netting.

The OTC Derivatives Working Group looks to create standards around derivatives processing, trade notification, reconciliation, collateral movements and interest payments. The Reconciliation Working Group focuses on existing and potential issues for all messages that facilitate the cash and securities reconciliation practice.

The Settlements Working Group works to define best practices for the communication of settlement instruction and confirmation messages for all securities related financial instrument types; foreign exchange transactions; collateral messaging and currency movements.

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