Data automation platform Xceptor and post-trade issue resolution network Taskize have developed a solution that manages and audits correspondence. They spoke to BEST EXECUTION about why transparency is essential across the trade lifecycle, why it’s not just T+1 settlement issues the solution tackles, and how email can cloud operational processes.
The new solution helps to drive trade volumes, enhance efficiencies within confirmation analyst teams, and reduce the risk of financial loss. Xceptor senior product manager, capital markets, John Bevil, told BEST EXECUTION: “In today’s markets, all participants need to have a clear understanding and insight into the status of the trade to ensure the successful delivery or settlement.”
This transparency means participants achieve greater control, mitigating any potential risks early enough in the process to avoid unscrupulous behaviours and steering clear of fails and potential penalties.
“Moreover, transparent post trade practices assume a critical role in fortifying risk management protocols enabling confidence and best practice to become embedded across the post trade ecosystem.”
Taskize head of business development, James Pike, told BEST EXECUTION that although a lot of attention has been paid to improving transparency for front office processes, we are now seeing a concerted effort from market participants, market infrastructure providers and vendors to address opaque processes in the back office. “And not before time,” he said.
Pike said Taskize identified a significant lack of transparency around how, both internally and externally, work is allocated and communicated. “Too often, email is the default means by which operations teams raise and resolve queries, which clouds the process.
“Transparency means knowing who I need to ask about a particular query and a more interactive means of monitoring how it is resolved. Additionally, providing the user more data on the drivers of the issues is an important factor in improving a process and increasing operational efficiency,” Pike added.
By consolidating email correspondence, the solution makes it easier to manage and audit, allocating queries, and ‘learning’ who is best suited to resolve each one. This helps to reduce costs and risk, drive trade volumes, boost transparency, and allows the confirmation of trades even where there is no common data structure.
It also deals with the reality of the 5% of unlisted securities that fall into dispute and the 40% that require manual chasing or affirmation.
With counterparties folding all communication into this real-time trade affirmation service they can affirm on T+0, reducing the risk of financial loss from economic breaks on complex trades that currently appear at T+3.
Moreover, in instances where a break has led to trade failure, the supply of evidence of all relevant conversations acts as invaluable analysis for assessing whether full preventative action was taken.
“Ultimately, it means companies can continue leveraging Xceptor’s tools and interface, while they and their counterparties benefit from Taskize’s collaboration and resolution workflow technology,” Taskize CEO Philip Slavin explained.
The looming T+1 settlement change is not the only regulatory pressure this solution helps to mitigate, Bevil said. By adopting a “broad brush” regulatory approach across the post trade ecosystem, its primary focus is to enhance transparency and to remove the inefficiencies of legacy communication methods, enabling clients to achieve compliance across a breadth of regulations.
“Outside of T+1 many of the same facets of post trade efficiency are established through The Central Securities Depositories Regulation (CSDR). This introduced implications for the post trade confirmation process by proposing various requirements to enhance settlement efficiency and mitigate risks in securities trading. It mandates shorter settlement cycles and imposes mandatory buy-ins for failed trades.
“The Xceptor solution is a key enabler in ensuring rapid and accurate confirmation production combined with Taskize’s strengths in targeted delivery and dispute resolution.
“Additionally, Dodd Frank and EMIR regulations require firms trading over the counter (OTC) to be compliant in reporting accurate trade information to the relevant authorities. These solutions enable firms to rapidly solve discrepancies whilst tracking and monitoring the state of the dispute across all parties to the transaction, and by doing so ensuring transaction reporting is accurate and integral at the first attempt,” Bevil concluded.
Pike said that although rules around execution of OTC derivative confirmations enshrined in EMIR and Dodd-Frank are nothing new, there is a need for greater efficiency in the process as well a need to mitigate both counterparty and operational risk.
“This is brought into sharper focus when the market experiences bouts of volatility leading to an increase in trade booking errors, which become very costly. The partnership with Taskize and Xceptor will help firms improve the efficiency of this process, bringing enhanced workflows in the execution of their uncleared OTC confirmations processes, thereby reducing operational risk.”
©Markets Media Europe 2023
