DTCC to build new infrastructure for straight-through processing
12 September 2019 London
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DTCC has outlined plans in a new whitepaper to build a no-touch processing infrastructure to eliminate inefficient manual touchpoints of straight-through processing.
DTCC explained that although the industry has responded with heavy investments in digital technology, post-trade processing has failed to keep pace.
Brokers, investment managers and custodians continue to struggle with demands from an unwieldy mix of multiple asset classes, platforms, systems and providers, with much a the post-trade process being handled manually.
According to industry estimates, approximately 20 percent of settlements fails are due to inaccurate standing settlement instructions, mostly resulting from local data stores and manual processing.
The whitepaper revealed that spending on post-trade processing is estimated at $6 billion to $9 billion annually, so cost-cutting would be significant.
DTCC suggested that its vision of enabling firms to reduce the number of touches in their post-trade processing and leverage consolidated exception and settlement management capabilities will drive settlement finality.
Matthew Stauffer, managing director and head of institutional trade processing at DTCC, said: “We have a plan to create an open, integrated and resilient post-trade infrastructure that eliminates redundancies and manual processing across an increasing set of asset classes.”
He added: “It is designed so the entire trade lifecycle—from post-execution to settlement—can be managed from one platform. With a no-touch processing infrastructure, reference data is centralised and enrichment occurs automatically from golden data sources, which would facilitate downstream processes and eliminate the need for local data stores.”
The report also noted that government regulators have noticed the system’s settlement failure rates and as a result, the Central Securities Depositories Regulation (CSDR), starting September 2020, will encourage the adoption of automation and straight-through processing.
DTCC suggested that once CSDR is in place “this improved path to settlement finality will become increasingly important”.
Under CSDR’s Settlement Discipline Regime, market participants will be liable to pay daily penalties or charges against each transaction that fails to settle, along with corresponding mandatory buy-ins for failing transactions after the prescribed number of days.
DTCC explained that although the industry has responded with heavy investments in digital technology, post-trade processing has failed to keep pace.
Brokers, investment managers and custodians continue to struggle with demands from an unwieldy mix of multiple asset classes, platforms, systems and providers, with much a the post-trade process being handled manually.
According to industry estimates, approximately 20 percent of settlements fails are due to inaccurate standing settlement instructions, mostly resulting from local data stores and manual processing.
The whitepaper revealed that spending on post-trade processing is estimated at $6 billion to $9 billion annually, so cost-cutting would be significant.
DTCC suggested that its vision of enabling firms to reduce the number of touches in their post-trade processing and leverage consolidated exception and settlement management capabilities will drive settlement finality.
Matthew Stauffer, managing director and head of institutional trade processing at DTCC, said: “We have a plan to create an open, integrated and resilient post-trade infrastructure that eliminates redundancies and manual processing across an increasing set of asset classes.”
He added: “It is designed so the entire trade lifecycle—from post-execution to settlement—can be managed from one platform. With a no-touch processing infrastructure, reference data is centralised and enrichment occurs automatically from golden data sources, which would facilitate downstream processes and eliminate the need for local data stores.”
The report also noted that government regulators have noticed the system’s settlement failure rates and as a result, the Central Securities Depositories Regulation (CSDR), starting September 2020, will encourage the adoption of automation and straight-through processing.
DTCC suggested that once CSDR is in place “this improved path to settlement finality will become increasingly important”.
Under CSDR’s Settlement Discipline Regime, market participants will be liable to pay daily penalties or charges against each transaction that fails to settle, along with corresponding mandatory buy-ins for failing transactions after the prescribed number of days.
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