Post-trade processing is a complex and expensive operational overhead for the majority of financial services firms. Processing remains manually intensive and new derivative products created in the front office leave the middle and back office fighting fires to settle transactions, rather than delivering value to the organisation.
Where firms have attempted to automate processes, they have so far tended to do so in isolation - for example by instrument type or legal entity - creating operational silos and failing to cover the full lifecycle of the contract. With increased instrument complexity, fluctuating volumes and confirmation backlogs continuing to rise, the buy-side clearly needs to consolidate and centralise middle and backoffice activities across asset classes for confirmation, risk management, pricing, valuation and settlement.
Alongside the market pressures, regulatory scrutiny will also force firms to change for the better.
With the US Federal Reserve mandating that 75 per cent of OTC Derivatives confirmations must
now be electronic, delivering efficiency across post-trade processing is no longer a strategic option; it's now a pre-requisite to conducting compliant business.
There is a significant challenge in breaking down silos that have built up over years of operations to bring about the changes that are required. But by taking a more strategic view of operations, the technology and the processes used to support it, firms can remove many of the barriers to greater automation.
This paper will examine the ongoing challenges in post-trade processing, the technology and process foundations needed to deliver automation, and the benefits that centralised, multi-asset class automation can deliver.