The Post Trade industry’s current state business model is challenged as the Industry stands at crossroads with traditional business is no longer attractive with lower fees and a lack of differentiation between players. Clients demand value-added services:
• Front office demands quicker clearing and settlement, near real-time view of trade status, and early warnings for settlement failures.
• Clients demand the transformation of today’s complex workflows into a more simplified and user-friendly digital experience.
• Clients are demanding capabilities to support the acquisition of newer asset categories as these continue to gain traction with Institutional investors.
• As Clients diversify across broader asset classes and deal with many service providers, there is a need to aggregate and consolidate data to get a unified view of the portfolio.
• Over the last few years Industry has seen a spate of new regulations aimed at reducing systemic risk, reducing cross-border restrictions, and driving customer protection which is putting an additional burden on players for compliance.
• There is a need to expand service offerings as Asset Managers are increasingly outsourcing non-core functions such as trading desk support, investment books of record, and managed data services.
The industry is stuck with poor global business operations design with manual workarounds coupled with legacy technology. Cost-cutting initiatives have resulted in unsatisfied clients as SLAs are missed, technologies fail, and their day-to-day level of personal interaction with operations staff has suffered. All this has resulted in inconsistent client experience across different centers. To top it all, there is increased pressure on revenue as traditional core services like custody, clearing, and settlement are all considered commodities with little scope for innovation, making it difficult to allocate money for transformation.
Despite all the challenges, there is no doubt that service providers have no option but to change quickly if they want to retain market share. Firms can transform by leveraging Technology, as technology can help to meet the growing demand of clients for increased product offerings and value-added services and help in streamlining operations, reducing cost, and managing risk.
Firms must consider the following aspects to design for transformation and adapt to new-age architecture to achieve success:
Improved Client Experience
• Provide Consistent Client Experience across regions with a consistent Digital front end.
• Provide value-added products on newer asset classes like Alternatives and Digital Assets and additional services like Trading desk support, collateral management, etc.
• Provide Clients with dashboards and self-service tools to enable clients to see aggregated as well as individual positions in near real-time.
• Provide clients full access to data in real-time, along with analytical tools to build and run proprietary risk-return models.
• Consolidate Data across the value chain of service providers and trade lifecycle to enable deeper insights into trades and positions.
• Provide Clients with easy communication channels and a simple client service model. • Provide clients with flexible pricing and invoicing model.
Simplified and Efficient Operations
• Build standard core business processes to provide a consistent experience across different centers.
• Embed Intelligent workflows and automation across the trade lifecycle to provide a higher level of Straight Through Processing.
• Build an AI-Driven Operations dashboard to ensure that client issues are identified and resolved as early as possible in the trade lifecycle.
• Build a robust Integration Hub to manage all external connectivity into local CSDs and markets.
• Empower the virtual workforce by outsourcing to low-cost centers.
Modern Cloud Native Architecture and Infrastructure
• Cloud-based as-a-service model to provide clients with services in a modular way.
• Integrate with third-party software components and ecosystems to enhance the overall solution.
• Build Resilient & Secured infrastructure designed for 24x7 availability.
• Agility and Scalability to offer new products & services, enter new markets, and ability to scale globally.
Industry Players should understand the challenges and needs of Post Trade Industry, understand what Institutional Clients and Industry Regulators across the globe are demanding from their service providers, have a future state vision of where the industry is heading, and must have a Point of View on what capabilities will be needed to design and deploy a multi-asset class global operating model which is so critical to achieving a superior Client experience.
Bhushan Joshi – CIC Leader, Financial Markets, IBM
Srinivasan Kalyansundaram – Professor of Practice in Finance at IFMR Graduate School