The industry’s focus on improving the post trade process is growing due to the success of electronic placements, increased customer demands and trading volumes as well as a need for cost-reduction, reliability and performance. Trades are now electronically executed in milliseconds but post trade processing still takes hours or days along with frequent human intervention.
When it comes to the buy-side’s perspective of post trade processing, many of our clients have faced the same challenges. There may be too much systemic risk with single points of failure, the infrastructure may be unreliable and hard to manage with multiple methods of connection and incapable communication mechanisms. Also, we have seen that processing differences across asset classes may increase time and cost with multiple user interfaces, different workflows and various intermediary vendors.
The underlying problem is that post-trade processing grew organically, from both ends of the trade-lifecycle, and differently for each asset class, rather than being designed up front. As a result there are variety of protocols, communication mechanisms, and workflows in use. Intermediary vendors stepped in to help bridge this gap but each had their own protocols and workflows.
The key reason that the industry is now in a position to improve post trade processing is FIX. The data captured during the FIX trade process (i.e. orders and execution reports) along with the FIX infrastructure, is being leveraged, using industry developed Post-trade Recommended Practices, to substantially improve post-trade processing speed, reliability, accuracy, ease of matching and reconciliations, along with reduction of trade breaks.
If you are looking to improve the buy-side post trade process, the first step you should take is to identify what your challenges are and where your opportunities lie. It is common for the buy-side post trade infrastructure to have multiple protocols, channels and user interfaces across various asset classes, counterparties and services. To improve this process, we suggest you analyze the situation and determine your desired result.
Next, we tell our clients to picture what your ideal situation would be and what you would like your post trade process environment to look like. This can and should include a common infrastructure, common user interface and common protocols.
The third and final step is to realize how you want to get the desired post-trade infrastructure. There are important decisions to be made about how you want to interact with the sell-sides (bi-lateral or not, outsourced or in-house) however, you don’t have to decide this right away. In fact, we believe you want an approach that allows you flexibility in these decisions and the ability to change your mind across time as post-trade technology evolves.
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FIX Infrastructure It was a pleasure to have an opportunity to speak at the 2017 Americas Trading Briefing, which was graciously hosted by Goldman Sachs. As usual, the room was filled with more than 250 senior market participants and 25 expert speakers to discuss important topics, trends and issues we face together as the FIX Trading Community. […] June 7, 2017
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