If Amazon did T+1 Settlement: How Post-Trade Operations Are Moving Towards Real-Time Control

From monitoring bank balances to tracking package deliveries, we’ve grown accustomed to having information at our fingertips. But what about the state of post-trade operations in the capital markets? As regulations tighten and demands for efficiency are increased by the transition to one-day settlement cycles in US securities, the need for real-time visibility and control in post-trade operations is becoming paramount.

 

The act of onboarding clients and the processes around trade allocation, confirmation and affirmation are unlikely candidates for headlines about transformative technology innovation when pitched against the thrill of front office trading and the excitement that AI and blockchain technologies still generate. And usually they can’t compete – even if all institutional trading relies on the efficient and robust running of post-trade systems behind the scenes.

But this year is post-trade’s time to shine. The SEC’s decision to shorten settlement times to T+1 has sparked a rush of interest in the sector: once the bonnet was opened, market participants started wondering if it was time for a full vehicle inspection. Even though the focus of the regulation for T+1 settlement is securities, there is an indirect effect on FX and fixed income too, and many firms are now taking an holistic view on operations processes across all asset classes. Shorter FX trading-settlement timeframes reduce the window for resolving issues, necessitating efficient and timely technical account onboarding, data completion, and issue escalation, especially given the complex, multi-regional nature of cross-asset processes.

Our Onboarding, Connectivity and Operations service enhances post-trade operations and connectivity, enabling clients to efficiently monitor and manage their networks. Just as your smartphone app keeps you informed about your financial health and the whereabouts of your Uber ride, post-trade operations now require a similar level of real-time transparency and accessibility at a time when supervisors’ stance towards operational challenges is becoming increasingly unforgiving. The pressure is on for banks and investment managers to demonstrate full control over their post-trade processes. Like tracking your Uber’s journey, operational teams need to know where trades stand, identify bottlenecks and errors, and take proactive measures to ensure timely settlement.

Regulation and oversight as key drivers

A single change in the overall financial market ecosystem often has ripple effects across the whole network, with some consequences more noticeable than others.

In the case of moving to a 50% shorter settlement time for US securities, market participants in FX will have 83% less time to perform post-trade processes than in the current regime, according to calculations from industry association AFME.(Source)

Another key consideration is whether the shorter timeframe will affect performance, or in other words whether the risks of failed trades and operational errors would increase. The short answer, according to both AFME and buy-side industry participants, is an overwhelming yes.

Post-trade efficiency is firmly in the sights of regulators and industry oversight bodies. In currency markets, the FX Global Code of Conduct is calling for better operational processes, including more timely confirmations as well as a general technology upgrade to increase efficiency and accuracy. The standard-setting body for OTC derivatives, ISDA, continues to focus on give-ups and the timings associated with communications around them.

In European securities markets, the settlement discipline regime of the Central Securities Depositories Regulation (CSDR) has introduced several measures to reduce the number of settlement fails, to prevent such failures and to cajole market participants into settling accurately on the intended dates.

In the futures markets, FIA and DMIST, the Derivatives Market Institute for Standards, jointly announced the publication of the Final Standard for Improving Timeliness of Trade Give-Ups and Allocations, designed to improve the delivery and processing of allocation instructions by establishing 30-minute timeframes for completing steps in the allocation process .

In summary, regulators and oversight bodies are quite clear in their messaging to market participants: operational failures such as trade breaks, and system outages will be met with a zero-tolerance policy from rule makers, and full historical post-trade transparency and visibility is a must.
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Change for the better: real-time service monitoring and more

To comply with these rules, market participants need to have more granular visibility into what happens to trades after execution, which in turn requires infrastructure and service providers to step up their game in areas such as flexibility of access, onboarding and integration, among others. That means it’s all eyes on onboarding, connectivity and operations.

Achieving this operational upgrade is more complicated than it sounds, due to the complexity of the post-trade ecosystem and the varying levels of technology requirements participants have. Legacy and fragmented post-trade infrastructures across multiple systems and vendors have to be consigned to the past in favour of a single, more closely-coupled system.

It’s in everyone’s interest to have better visibility into the health of the systems, services and counterparties involved in the affirmation, matching, confirmation and clearing of trades. Consider your Fitbit alerting you when your heart rate spikes unexpectedly. Similarly, in post-trade operations, timely alerts and diagnostics are crucial for identifying and resolving issues before they escalate. Whether it’s pinpointing delays in trade processing or diagnosing connectivity issues with counterparties, the ability to swiftly address problems is vital. With T+1 settlement approaching, the stakes are higher than ever, akin to keeping a close eye on your health indicators to prevent potential complications and unpleasant surprises.

Just like we have become accustomed to skipping queues through self-service, banks and investment management firms are requesting greater autonomy with respect to the initial integration and technical onboarding of their systems and underlying clients through self-service tools. The expectation is that this should be combined with greater visibility into the health of their post-trade networks and services including the physical and logical connections used to carry messages between market participants, all supported by a comprehensive customisable reporting suite. This includes greater flexibility with respect to accessing services, which is fueling demand for Single-Sign-On (SSO) and operational dashboards driven by real-time data accessed via API.

In response, OSTTRA has developed a new service for its clients – OSTTRA’s Onboarding, Connectivity and Operations (OCO) Suite – enabling network participants to track the health of their post-trade operations across asset classes and counterparties. The initial release provides enhanced system monitoring:

OSTTRA for Onboarding, Connectivity and Operations provides granular visibility into what happens to trades after execution.

Get granular visibility into what happens to trades after execution with OSTTRA OCO.

 

While the cost of operational failures has never been higher, regulatory and supervisory forces are combining with business needs to create an unusually difficult landscape to navigate. This is why market participants need to move towards a single screen to view operational processes and away from the current, fragmented approach.

This desire is reflected in the exchange traded derivatives (ETD) market, according to the findings of a March 2024 listed derivatives study, produced by Acuiti in association with OSTTRA: Almost 90% of ETD market participants surveyed said that it would be either crucially or very important to have a consolidated view of T+0 and T+1 processes, a desire particularly evident among the sell-side. The biggest benefits of such a view would be in risk reduction according to survey respondents, but there are also perceived upsides in operational efficiency and costs.

Clearly, as the industry prepares for an unyielding approach from regulators around trade breaks and systems down time, market participants need better visibility into the health of their systems, networks and trade status as well as an easier ride in terms of interacting with and managing processes.

When a Prime Experience Comes to Post-Trade Operations

Against an accelerated market dynamic, market participants want greater autonomy to go at the pace needed to bring solutions to market quickly. They are asking for the ability to use self-service tools during the initial integration and technical onboarding of their systems and underlying clients and they want to combine these with a greater level of visibility into post-trade networks and services, in a way that’s personalised and intuitive, just like the everyday instances of self-service we’ve all become used to.

After all, this already happens in other areas of life: the ability to track packages, taxis and food orders after the purchase is taken for granted in most customer-facing areas. Amazon customers rarely need to call the Amazon helpdesk because the service interface gives you all the info you need about your past and pending orders, orders currently out for delivery, mechanisms for raising queries and product how-to features, among other things.

For post-trade, this means an increased granularity and visibility into connections that handle messages between participants, both physical and logical, and a comprehensive and customisable monitoring suite. There is also growing demand for creating a Single Sign-On entry point for services in the same bucket to streamline workflows and step-up efficiencies.

Abundant data and the ability to easily channel information through automatic API connections has given rise to expectations that processes and exceptions should be viewed in real-time in a convenient format such as a dashboard.

But it’s not just ease of access and user experience that’s driving the quest for efficiency in post-trade, and it’s not just regulatory change either. As large financial market players continue to face headwinds, even marginal improvements along the post-trade lifecycle can make a meaningful difference to balance sheets.

In the year ahead, these headwinds will persist, according to consulting firm Deloitte, which predicted in its 2024 outlook for financial services that “banks’ ability to generate income and manage costs will be tested in new ways” while noting that “multiple disruptive forces” are conspiring to reshape the foundations and the architecture of banking and the capital markets industry.

These factors are making it imperative for market participants to see and manage the whole picture, not just parts of the post-trade jigsaw puzzle. It’s a small surprise, then, that Acuiti’s study predicts a push towards consolidation of vendors and processes, as market participants strive to reduce complexity. The survey found that the overwhelming majority of companies are now looking to consolidate their relationships with vendors to those that can offer comprehensive post-trade services covering the full lifecycle of trades.

What It Takes To Turn Post-Trade Into A Five-Star Rated Experience

Just like when you decide to cancel your booked Uber ride when your driver is stuck in unexpected traffic, market participants should be notified about any and all events that impact trade matching. Factors to monitor should include physical and logical connectivity, system outages, platform performance as well as failed and pending messages, which impact match statuses, trades processed and associated market participants.

Trades could fail for a variety of reasons but market participants get little actionable information about such events at the moment. Better visibility into what happens to trades before they arrive at the back office is one of the key areas where there is demand for improvements, especially if there are operational reasons involved in a failure.

Rather than just identifying that there is a discrepancy, market participants should be able to tell which trades are having issues due to operational reasons and where those problems are before failures happen. The ability to see in real-time the status and health of trades as they traverse trade lifecycles and ecosystems would reduce the chances of errors creeping in unnoticed and resulting in failures or broken trades.

Similarly, dealing with exceptions should be easier and solved in a way that allows firms to track, manage and resolve these issues as soon as possible and in a structured manner. Automating incident management and allowing both parties to track them, enhancing both inter- and intra-company collaboration and enabling remediation are actionable steps for the industry.

Reporting is also ripe for upgrades and it’s an area where market participants would benefit from better visibility into operational and trade level metrics as well as the ability to compare and benchmark firm-level performance against peers. Having more control and autonomy over the format and frequency of these summaries and insights would allow institutions more flexibility to prove good performance and regulatory compliance.

Standardising how post-trade information is accessed and distributed is also something where efficiency gains need to be made. Adopting API connectivity for post-trade workflows and operational data access would significantly upgrade the quality of the user experience and increase the utility of the data and information.

These are just some of the examples that could benefit the overall ecosystem and promote the health of both the post-trade networks and its participants. The Onboarding, Connectivity and Operations service for OSTTRA clients aims to address this challenge by offering a seamless way of increasing transparency and control of post-trade operations:

OSTTRA for Onboarding, Connectivity and Operations

What three words for the post-trade path ahead: volatility, risk and control

Equity markets are surging to new highs and risky assets continue to remain buoyant despite interest rates in major economies staying at multi-decade highs. The approval of Bitcoin ETFs has launched crypto on Wall Street for real, in a year when the world’s population is heading into a record number of elections. Rate cuts, new dynamics in some markets and quite a lot of event risk are conspiring to lay the groundwork for elevated volatility.

For traders, this is great news because high volumes and volatility promise the possibility of rich pickings. From an operational point of view, it’s a more mixed outlook that will be about balancing the need to manage operational risk with the need to heed the shareholder call to achieve operational efficiencies that shore up margins.

As this financial landscape evolves rapidly over the next year, the accelerated evolution of post-trade towards on-demand operational insight and real-time monitoring is not merely a regulatory necessity but a strategic business imperative. Just as we rely on seamless digital experiences in our daily lives, financial institutions must adapt to this new paradigm: Instantaneous visibility and control aren’t just conveniences; they’re essential tools for mitigating risk, ensuring compliance, and optimising performance. With T+1 settlement leading the charge, the push for transparency and efficiency will extend beyond equities to encompass other asset classes like FX and fixed income, and far beyond the borders of the United States of America, with post-trade pundits expecting a move to T+1 in the UK and the EU in 2025.

Learn more

Our OCO suite helps OSTTRA clients improve operational control and reduce operational risk through the delivery of automated service connectivity, self-service onboarding, real-time service monitoring and exception management, and customisable reporting. To find out more, please visit OSTTRA for Onboarding, Connectivity & Operations.

Futureproofing Listed Derivatives:
Building operational resilience across the market

This study on the state of ETD post-trade operations shows significant progress has been made, but major risks remain.

Download the ‘Futureproofing Listed Derivatives Post-trade’ Report here.

 

In March 2020, the volatility and record volumes triggered by the initial outbreak of Covid-19 overwhelmed post-trade infrastructure. Our study, produced by Acuiti in association with OSTTRA, finds that whilst a significant majority believe that progress on resilience has been made since 2020, 61% of respondents feel that there are still major risks in the listed derivatives post-trade environment, with allocations and give-ups key areas of concern. “Futureproofing Listed Derivatives Post-trade” is based on a survey and series of interviews with senior executives at 57 of the major sell-side and buy-side firms operating in listed derivatives.

The key findings of our ETD Industry Survey include:

  1. Top Investment Priorities: Discover the top three areas where organisations are planning substantial investments over the next three years, providing critical insights into industry trends and future focus areas.
  2. Cloud Evolution: Explore how organisations’ attitudes towards cloud-based software have transformed over the past five years, with 55% expressing significantly increased openness to cloud solutions.
  3. Post-Trade Complexities: Uncover the top three areas of complexity for both buy-side and sell-side institutions, shedding light on challenges faced in collateral optimisation, margin processing, and reconciliations.
  4. Data Standardisation: Learn about the industry’s stance on a mandatory, expanded data set for each trade, with 43% expressing a strong belief in its necessity and 57% considering its potential benefits.
  5. DMIST’s 30/30/30 Proposals: Gain insights into industry perceptions of DMIST’s 30/30/30 proposals, with 49% highlighting concerns about high volume trading sessions continuing to cause issues.

 

To find out more about our end-to-end ETD post-trade processing capabilities, please contact us at info@osttra.com.

OSTTRA Awarded ‘Post-Trade ETD Provider of the Year’ at the FinanceFeeds Awards

OSTTRA is pleased to announce its recognition as the ‘Post-Trade ETD Provider of the Year’ at the FinanceFeeds Awards. This achievement underscores OSTTRA’s commitment to innovation and excellence in the ETD post-trade landscape.

 

The accolade is a result of OSTTRA’s ongoing efforts to simplify and optimise ETD post-trade processes. Collaborative endeavours with industry stakeholders have yielded significant improvements, including streamlined order IDs to enhance the give-up process and enhanced allocation records, reducing the need for manual commission schedule checks, thereby enhancing operational efficiency.

OSTTRA’s robust connectivity with Clearing Houses has facilitated trade record enrichment through the sourcing of the Exchange Order ID, providing improved trade visibility. Additionally, direct client allocation submissions to Clearing Houses have minimised delays and offered real-time insights into trade clearing status.

Joanna Davies, Managing Director FX & Securities at OSTTRA, expressed appreciation for the recognition, stating, “This award is a testament to the dedication and collective efforts of our teams and the commitment of our valued ETD network participants.”

FinanceFeeds acknowledged OSTTRA’s contributions to the industry, noting, “As OSTTRA’s achievements continue to shine, their remarkable contributions to the industry’s evolution have not gone unnoticed. Our gratitude goes to OSTTRA and their team for their commitment to transforming the ETD post-trade landscape.”

In conclusion, OSTTRA winning the ‘Post-Trade ETD Provider of the Year’ award affirms its commitment to delivering practical, impactful solutions in the ETD post-trade space. This recognition reflects OSTTRA’s longstanding leadership and continued dedication to innovation in the industry.

 

 

To find out more about our end-to-end ETD post-trade processing capabilities, please contact us at info@osttra.com.

ETD Bulletin

The next chapter in the saga of delayed ETD trade allocations

A never-ending story where everyone waits in anticipation for the next instalment. Well, it is Oscar season after all. But for those of us immersed in the world of market infrastructure, there is a more esoteric narrative developing that would rival any academy award winning script. While the story of enabling greater visibility and efficiency in exchange-traded derivatives (ETD) markets is far from complete, there are more than a few signs of progress.

In part one this time last year, we talked extensively about how the industry, as a whole, needed to work together. Only through collaboration can firms have real-time transparency into the status of the executions, and control over the allocation of risk to the correct accounts at the clearing brokers. This transparency is key in driving a significant reduction in operational risk and cost for all participants, as well as significant capital cost reduction for executing brokers.

Exploring these issues through industry dialogue and fostering a spirit of collaboration, we are delighted to report that we have made real progress in developing solutions to help mitigate these challenges.  Take the issue of order IDs as a prime case in point.  By uplifting our services to support the matching of order IDs from both buy-side and executing brokers, clearing firms will no longer be encumbered with an imperfect process of hunting for fills to pair off with allocations submitted using average price, enabling a smoother and more expedient give up process and submission onwards for clearing. If standardisation is the key to unlocking the door to success, as per the broader blueprint published by the FIA back in October, then our uplifting of the trade order ID component takes the industry a further step forward.

However, while finding a solution to the ID component is unquestionably a mark of progress, there are additional chapters to come in the ETD trade workflow story.  Reconciling the correct execution commissions remains a significant headache for the FCM community.  In response, we are enriching allocation records with the appropriate data, removing the need for brokers to manually look up commission schedules and append trades with the correct amounts.

We’re also looking to drive further efficiencies by connecting bi-directionally to Clearing Houses in order to deliver two clear benefits.  Firstly, the further enrichment of trade records by sourcing the Exchange Order ID which will provide an irrefutable link between EB Fills, Client allocations and the trade held at the clearing house. Secondly, by directly submitting client allocations to Clearing Houses, we can remove potential delays and provide investment firms with a direct a view into the clearing status of their trades across their entire broker network.  We began this journey by connecting to CME clearing and are working to integrate a further four major CCPs in the coming year.

Our ongoing talks with many industry participants suggest that continuing to adopt a pragmatic and expedient way to solve the functional issues is the right approach and starts the ETD community on the path to implementing standards, as guided by the FIA blueprint. It all comes down to bringing operational efficiency, transparency, and timely processing, while giving buy-side firms the necessary flexibility to meet their mandates. Ultimately, the transformation of the workflow should be the primary goal for all parties but, for ETD, most participants are still talking about evolution as opposed to revolution – and our progress at OSTTRA clearly aligns with that sentiment.

So, while the award winners at this year’s Oscars may well feature exciting plot twists and taut psychological drama, we’re backing a more predictable script for our industry in the coming years.  A storyline built on careful analysis, step by step change and, above all, continued collaboration among all ETD market participants.

Enhanced ETD network streamlines post-trade processing

We have enhanced our OSTTRA ETD ClientLink service, to address inefficiencies in ETD trade processing in line with the FIAs blueprint to modernize trading and clearing processes.

These changes enhance our existing network of more than 180 industry participants to address key workflow challenges in give-up, allocation and clearing processes, aimed at reducing delays and errors in achieving trade finality and thus reducing systemic risk for the industry.

 

Firms will be able to take advantage of the following key enhancements:

 

Key benefits for participating firms include:

Collaboration is King at FIA IDX 2021

Decades of delayed trade allocation issues in exchange traded futures markets can only be resolved by the industry working together, according to industry experts at the FIA IDX conference in London this week.

Speaking at the ‘working together for post-trade evolution’ panel discussion on Monday, Joanna Davies, Managing Director at OSTTRA, said: “In many respects, we already know about the operational challenges we face, as they have been around for what seems like an eternity. The COVID-induced volatility last March put the issue of delayed trade allocations into sharp focus as we saw certain clearing brokers at risk. The stark reality is that if we as an industry can’t get together to do something about it, regulators may force the point on their own and implement a proposed solution that is not ideal.”

On an average day in exchange traded futures, 4% of global trading volume is given up more than a day late. During the height of the global sell-off in Q1 2020, the figure spiked to 7% (Source: FIA). “The pandemic fuelled volatility reinforced just how problematic the give-up process is, and the impact on operational resources when things go wrong,” added Nick Solinger, President & CEO at FIA Tech, who joined Davies on the panel.

One of the biggest challenges around trade allocations outlined by the panel was around order IDs. While all market participants have an order ID on a trade, there is currently no link between everyone’s order ID from trade execution right the way through to allocation and clearing. According to Davies, getting the right data in the right place is the key to making allocations more efficient.

“The information needed to ensure a stronger allocation process is available, the trouble is that the industry have not been attaching allocation instructions to orders at the point of trade. Some may say a behavioural change amongst the buy-side is needed, but it is actually a process change that is required. There needs to be a desire to enrich trade notifications to reduce congestion at the end of the trading day. The buy-side should be allowed to trade as they wish. It is not about asking them to change, instead we should enrich allocations with information already in existence to try and solve this particular issue.”

“That collaborative work has only just started, and will require all industry stakeholders to put talent, energy and resources behind standardisation efforts. This won’t always be easy, but it’s necessary to seize future opportunities as well as to ensure that futures markets are not forced to deal with unwanted attention from regulators,” concluded Davies.

Solving the Domino Effect of Delayed Trade Allocations

Over one year on from the pandemic-driven volatility last year, Joanna Davies of OSTTRA takes part in a Q&A that explores how buy-side firms can gain greater visibility and efficiency in exchange traded derivatives markets.

 

Jo, it has been over a year now since the first wave of the pandemic rocked global markets. Can you cast your mind back and tell us about what this unpredicted period of volatility was like for OSTTRA clients?

Imagine this, the head of equity futures for one of the world’s largest asset managers is trying to navigate clients through the worst trading day since the 2008 financial crisis. Dow Jones futures tumbled more than 1,300 points, and executing brokers are subsequently scrambling around trying to work out how to fairly allocate an order for over 1,000 Dow futures across multiple funds.

This COVID-19 induced global volatility reinforced just how painful the give-up process is for our clients, and the impact on operational resources when things go wrong. This isn’t a new problem either – give-ups have been a thorn in the side of market participants for decades.

 

What were the specific challenges that the buy-side side had to overcome during this time?

Typically, asset managers placing and managing large orders across multiple funds can only allocate across these funds once they know the final quantity and average price of the entire order. Sometimes, it is the choice of the asset manager in terms of how long it takes to complete an order. This can be achieved through using algos, good ‘til cancelled (GTC) orders, or limit orders that sit at the edge of trading ranges – which can create a huge backlog of unallocated fills.

In addition, while an asset manager may be highly efficient in the allocation process during times of peak volatility, there could still be multiple allocations being communicated within minutes of the market closing. This creates an entire myriad of problems, with which the industry continues to wrestle.

 

Interesting, so what is the knock-on-effect on the sell-side?

Even if the asset manager allocates early in the day, the challenge for executing brokers is to identify the exchange fills (executions) associated with a single order. These executions at different price levels must be average priced before they are given up. To compound the challenge, in keeping with their mandate, asset managers are executing multiple orders during volatile periods to manage the risk within their portfolios.

Executing brokers play an important role by providing buy-side clients superior execution quality through strategies that reduce the market impact of buy-side activity, but often get hit with a hefty capital charge when the allocation of give-ups are not successful. They must clear these overnight and absorb the cost with no recourse to pass on the charge. This poses a risk to smaller executing brokers, in particular. In addition to average pricing complexities, inconsistent data models, and the lack of common symbology all complicate the allocation and matching process for all market participants.

 

Aside from the executing brokers, who are the other market participants effected by the give-up process?

Clearing brokers also are on the hook for clearing trades that are covered by a give-up agreement but have limited visibility or control of the upstream process. The industry challenge is more than just inefficiency in the give-up workflow. Checking give-up agreements and commissions are dealt with at the clearing member’s end of the workflow where timing and lack of quality data conspire to make trade acceptance hazardous and resource hungry.

Moreover, issues can occur due to the sequential nature of the give-up workflow where trades are still sitting with the executing broker before the clearing broker accepts them. Fills accumulate on the executing broker’s account at the clearing house until allocated. Once a client disseminates its allocation, the client remains in the dark until the clearing broker confirms the trade back to them.

One hiccup in this workflow will delay or prevent the give-up from completing. During this process, the trade is cleared in the eyes of the clearing house but is not cleared from the perspective of the executing broker or asset manager – which leaves unallocated exposure. All the while, the client is oblivious to any issues.

 

Ok, so what does the industry as a whole need to do to overcome this longstanding challenge?

The goal of any process improvement should be to reduce the operational, financial, and capital cost for executing brokers and must give the buy-side client real-time transparency into the status of the executions and control over the allocation of the risk to the correct accounts at the clearing brokers.

For the clearing broker, the process must provide real-time visibility into give-ins so the members can assess the risk of the positions in a timely manner. Improved transparency and greater control of risk will ensure timely processing of give-ins. Several CCPs provide standardized and real-time workflows for average pricing, give-ups and give-ins that serve as a good foundation to meet the goals of the buy-side, executing broker, and clearing broker. Each participant has a crucial role to play, and it may simply be a case of re-assigning responsibilities to the corresponding change in the workflow.

The exchange view of the trade should remain the immutable record, but the buy-side clearly group and reference it from a very different perspective. Relatable data points, like common order IDs, from all sides would allow the two perspectives of immutable record versus a client copy of the allocation, to be matched.

 

What is the role of a vendor like OSTTRA in helping the industry finally overcome this challenge?

OSTTRA has an extensive network of executing and clearing brokers that service over 100 buy-side clients. Our established ETD ClientLink service not only normalizes client allocation messaging but enriches them with fills from the executing broker. The service also manages the nuances between different broker requirements, helping to negate complexities arising when dealing with multiple executing and clearing brokers.

We have applied in-depth industry knowledge to encourage change from buy-side partners to help allocation processing. A key part of this is the work we are already doing to capture relatable data from all sides in order to unlock efficiencies. OSTTRA are extending existing ETD ClientLink functionality to meet many of the challenges under industry discussion, with a view to utilizing new technology and services as they become proven.

As mentioned previously, buy-side clients need flexibility, and it is impractical to constrain their needs to achieve the operational efficiency of timely allocations and give-up processing. We at OSTTRA believe we can bring operational efficiency, transparency, and timely processing whilst giving buy-side firms the necessary flexibility to meet their mandates.

Conversations with multiple industry participants indicates this approach as the most pragmatic and expedient way to solve the functional issues. Our experience in the reformation of OTC clearing workflows, only adds to the support of our participation in this complex debate. Success in achieving these goals requires us to collaborate on designing the workflows with buy-side clients, executing brokers, and clearing brokers and leaves the door open for other service providers to join forces to solve. What is becoming increasingly clear, however, is the transformation of the workflow should be the main goal for all parties.

As an industry, we need to ensure that we let the workflow determine the technology, not the other way around.

 

Since we last spoke, how have your engagements with industry participants progressed?

We have discussed our proposals with a wide range of industry participants including asset managers, clearing brokers, executing brokers and clearing houses. As we previously discussed, it is important to understand the different needs of the various market participants and to make sure that any technical solution takes their specific challenges into account. We have been involved in some fantastic debates and have received great support and encouragement to push ahead with the enhancement of our existing ETD ClientLink service in order to address the long-standing industry challenges previously discussed.

What has been really encouraging is the feedback we have received from the clearing houses, where everyone is agreed that the processing of allocations is where the bulk of the problems lie and should be an area of focus for the industry. Our discussions have allowed us to focus our technical strategy on those areas that will deliver the most benefits in the shortest amount of time, with minimal disruption. Everyone we have spoken to agrees that change is required and are keen to monitor the progress of our technical developments.

 

So, in conclusion then Jo, exactly where are you with these technical developments?

Things have moved rapidly in the last few months, and we are continuing to work on a Proof of Concept (POC) that addresses many long-term issues. We have established connectivity to the first clearing house, CME, for the receipt of core trade economics and the subsequent submission of client allocations including additional execution and clearing broker fees, where applicable. We’re now at the stage where we are presenting our progress to industry participants for their valuable input.

We have been able to leverage our existing network connectivity to create an enriched master record comprising trade details collated from multiple market participants and we are now looking to expand on the population of this data through engagement with additional service providers, as well as waiting to receive the output from the FIA group working on agreed industry standards. We believe that this collegial approach is the truly the best way to deliver real and tangible results to the industry.

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