Centralising the reconciliation process for a US Corporate

Client type: Mid sized corporate
Existing reconciliation: In-house/manual

Challenges

The firm uses portfolio reconciliation as a financial control around swap position verification and to support the collateral disputes and hedging processes. In addition, they use counterparty mark-to-market as an observation point in their own pricing validation routines.

This was a manual undertaking they supported by collecting daily dealer statements for both swap positions and collateral positions, each from a different source and in its own format.

Given increasing trading volumes and number of counterparties, the lack of automation in the portfolio reconciliation process meant that the operations team struggled to manage these manual tasks in a timely and efficient manner:

Capturing data from multiple sources
Mapping and normalising the data into a specific format
Running macros and queries to match data sets
Resolving breaks in a timely manner

The manual nature of the tasks, as well as the dependency on counterparties’ timing and consistency in delivering required statements, meant that a lot of the team’s time and resource was being used to complete the process.

Time pressure, a lack of an organised workflow and a multiple-touch point process led to a greater risk of work repetition and an increased number of errors.

With an increasing workload, resolving the root cause of the differences was harder to achieve, which in turn was increasing the number of issues. In addition, the lack of transparency on the positions between parties also made it difficult to clearly communicate about breaks with counterparties.

Ensuring accuracy of their portfolio’s trade economics and valuations against their counterparties was key to reducing risk for the firm, as their hedging is only effective if they have an accurate view of exposures. In addition, they were finding that booking and processing errors had significant cost implications.

Our Solution

The firm took the decision to use OSTTRA triResolve for its portfolio reconciliation. Since all of their counterparties use OSTTRA triResolve as their primary swaps reconciliation engine, OSTTRA triResolve was able to streamline onboarding to their web-based leveraged technology platform and the client was up and running in just 10 days.

By centralising the reconciliation process, the firm now has access to all its counterparties in one place. OSTTRA triResolve can help with seamlessly automating the process, centrally receiving and normalising counterparty data and producing match results with a transparent bilateral view between parties.

This has resulted in an efficient, low-touch reconciliation process, where differences are highlighted instantly, enabling the firm to adopt an exception-based workflow. This allows the team to focus on the items that require their attention thus freeing up staff for higher value activities.

The firm can now work with its counterparties directly, in real-time, to resolve the differences, as opposed to working independently.

Additionally, the platform’s analytical, workflow, and communication tools allow root causes and underlying drivers of differences to be identified, assigned, tracked and resolved, thus contributing to a more accurate view of their portfolios’ exposures.

Positions can now be verified in a fraction of the time, ensuring the firm’s hedges are accurate. The firm has also automatically ingested counterparty mark-to-markets into their price verification process, increasing controls by eliminating any manual involvement.

To learn more about Portfolio Reconciliation, click here or contact us at info@osttra.com.