The FICC Markets Standards Board (FMSB) has agreed to implement the recommendations in the Post-Trade Task Force’s newly published report – Charting the Future of Post Trade.
The task force was established by the Post-Trade Technology Market Practitioner Panel, founded by the Bank of England and the UK’s Financial Conduct Authority in 2019, with the aim of leading reform and innovation in the post-trade space.
The repo
rt observes that “innovation in post-trade processes and client onboarding processes has at times lagged behind other parts of financial markets.”
Its focus is on three main areas – non-economic trade data, client onboarding and uncleared margin. Although it notes that there needs to be greater standardisation, it recommends that firms also make better use of the existing technology and automated solutions.
Bob Stewart, executive director of Institutional Trade Processing (ITP) at DTCC said the market infrastructure provider welcomes the findings which also advise sharing legal entity identifiers earlier on in the trade lifecycle, greater automation in settlement instructions (SSI) processing and increasing the use of efficient uncleared margin processes.
“In research we have conducted, inaccurate (SSIs) have been highlighted as one of the principal reasons for trades fails, therefore ensuring that market participants are leveraging available automated solutions will increase operational efficiency and mitigate risk, particularly during times of market volatility,” he added. “Sharing LEIs earlier on in the trade lifecycle will also enable easier identification of problem trades, leading to a more efficient post trade process.
Finally, increasing levels of automation in the processing of uncleared margin will deliver operational efficiencies and assist in-scope firms in complying with the forthcoming Phase 6 of the Uncleared Margin Rules (UMR), while leading to the more efficient use of collateral, therefore improving overall capital and liquidity management capabilities for users of these services.”
The report also calls for the creation of a post-trade industry leadership group to develop and promote best practices as asset class level.
This will be taken on by the FMSB, whose members will form a Post-Trade Committee with three working groups to consider the potential implementation of the task force’s recommendations within FMSB’s governance structure.
“FMSB taking this work forward will allow key Post-Trade Task Force recommendations to be adopted by the market at pace,” says Myles McGuinness, CEO of FMSB. “Through our membership, which is made up of all participants in wholesale markets, and our unique standards adherence process, FMSB is well placed to build on the Task Force’s output and embed it in the industry.
David Hudson, the task force chair and co-head of digital and platform services at JP Morgan, said, “post-trade systems and processes are the lifeblood of the financial system, but these are also areas where innovation has lagged.”
He added, “Failure to innovate will inevitably raise the cost of financial services and pose risks to operational resilience. The Task Force has made great progress over the past year to arrive at the tangible recommendations set out in this report, which tackles many of the key problems in post-trade. Knowing that we have a critical mass of market participants engaged in this initiative, I am hopeful that this will create a step change in how we think about these issues.”
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