Meeting the match
26 Jul 2023
SS&C managing director Parthiv Patel updates Lucy Carter on the firm’s trade matching and settlements service, T+1 readiness and the importance of transparency
Image: nicoelnino/stock.adobe.com
“SS&C’s Trade Matching & Settlements Service (TMSS) is a cross-asset solution that allows investment managers to outsource their matching, trade communication, affirmation and settlement administration functions to SS&C,” Parthiv Patel summarises.
The service “is based on [SS&C’s] proprietary technology, which has best-of-breed integration with major trading matching utilities,” facilitating straight-through trade confirmations and allocation delivery, he explains. TMSS’ “highly flexible operational model” makes it adaptable to specific market, product and recipient requirements. TMSS can automate and track both market and settlement statuses, Patel continues, and clients are given a transparent view of settlement and confirmation processes in real time. This is accessible via SS&C’s online portal, which aggregates data from matching utilities, custodians and prime brokers to create a unified view of a trade’s lifecycle.
A well-oiled machine
As of June 2023, the service had more than 150 clients. As the US market gears up to T+1 implementation, expected to go live in May 2024, a variety of services and solutions are on offer to help firms to prepare; one way in which TMSS stands out from market competitors is its “very low entry barrier to clients who are looking to enhance their post-trade functions through outsourcing,” Patel says.
Considering the shift, “the operational impact is pretty widespread,” Patel remarks. He anticipates straight-through processing and improved workflow efficiency in the post-trade space as the country takes this step, with these becoming “must-have items” in the new climate.
Outside the US, there are concerns around the impact that the shift could have on international trades, with the potential for fragmentation and increased settlement fails putting many market participants on edge. It’s an area that SS&C has honed in on, with TMSS “enabling international clients to match, allocate, affirm and communicate trades on trade date.”
This is achieved, in part, through the 24-hour service team that TMSS users gain access to. The team “ensures that SS&C’s international clients have proper coverage during US hours. They monitor and make sure that all trades are matched and settled within the market cut off, and they are able to quickly resolve any issues that may slow the process down,” Patel explains, “acting as an extension of the client’s team.”
Using the service, any mismatches that occur outside of local hours can be resolved by SS&C’s team on behalf of the investment manager, allowing for round-the-clock operations without the need for a constant in-office presence.
Outsourcing such as this continues to be a popular option for managers as they face increased regulatory demands, rapid technology evolution and, of course, reduced settlement cycles. “While we cannot predict any decline or increase in in-house development, we have definitely observed that through outsourcing, clients are able to prioritise their technology resources and redeploy their development dollars to focus on what matters to them — generating alpha,” Patel reports. Although it’s difficult to predict which way the wind will blow, this approach is proving successful across the industry.
Moving parts
As part of SS&C’s broader middle-office administration offerings, TMSS’ offering is compatible with the firm’s other fund services products. “Since this solution listens to the same trade messages as our existing fund services ecosystem, it’s very easy for our existing clients to integrate this service,” Patel explains. Additionally, “it does not require a long implementation cycle; it acts as a plug-and-play solution.”
Those already using SS&C’s services can quickly benefit from “a high level of operational synergies,” Patel adds. One example is the ability to capture real-time statuses from various utilities, custodians and prime brokers. Using this data, “we can apply intelligent automation for issue resolution on T itself, greatly reducing the amount of time our reconciliation team is spending on T+1 to review cash and position breaks.”
Conducting work on T “has a significant impact on downstream reconciliation and net asset value delivery,” Patel continues. “Those are going to be much cleaner, given the pre-work that we are already doing during the matching and settlement cycle.”
For existing SS&C clients, adding TMSS to their operations is easy. Taking a modular approach to outsourcing operations is a common practice, Patel says. “If a client is moving away from an existing service provider, then we would see a ‘big bang’ approach. But if a client is doing a lot of their functions in-house, then they may start by outsourcing activities with the biggest pain points and later decide to outsource other functions as they get comfortable.”
Soothing the pain
Pain points in a shortened settlement cycle are numerous. “From a matching and settlements perspective, one of the major pain points that the buy-side firms are facing is that they will have less time to process trade confirmations, allocations and affirmations compared to what they have today,” Patel affirms. A review of communication practices is essential, he advises. “Clients need to ensure that they follow a straight-through approach, and that their custodians and prime brokers are not resorting to manual touch points in order to settle trades on their behalf.”
It’s not all gloomy skies, though; Patel expects T+1 to bring a reduction in margin requirements, manual touch point risk and operational risk as firms automate their post-trade processes. Costs will drop, too, as technology conducts operations that currently require human intervention.
As for what TMSS can offer, “our solution is aligned with the best industry practices for T+1 readiness,” Patel assures. Standard settlement instructions are systematically maintained in order to reduce the risk of delays, and clients can outsource to the business’ straight-through matching and affirmation workflow using industry standard utilities.
Keeping it clear
Another key issue to be considered ahead of T+1 is the lack of transparency around settlement fails. Numerous industry participants have highlighted the lack of clarity around why a trade fails, something that TMSS wants to improve in the next enhancement to its central portal.
“We’re developing an innovative approach called Watchlist,” Patel reveals. Trades that require attention will be categorised under ‘critical’, ‘warning’ or ‘monitor’, with all unconfirmed and unsettled trades presented in a hierarchical view to ensure responsible parties are prioritising resolution.”
By categorising and listing unsettled and unconfirmed trades by urgency, “clients can see their priority for the next hour, for the next six hours, for the next day. They can scan through and figure out where their highest risk is.”
Beyond just a to-do list, Watchlist will be able to identify what’s going wrong in a trade and allow clients to see exactly what they, their stakeholders and their service providers need to do next.
“They will know exactly what is going on, understand who the responsible parties are for a trade failing and will know if they need to do something, This is a major enhancement that we’re looking to roll out,” Patel confirms. “I think the level of transparency it provides is going to help clients tremendously.” Patel explains.
TMSS may be ready to go for T+1, but what about T+0? Settlement cycle compression places progressively greater pressure on operations as time goes on, with firms already under strain from regulatory pressures, technology modernisation and a volatile macro environment. In regard to timeframes, “it’s hard for us to predict anything,” Patel comments. “It took the industry five years to move from T+3 to T+2. To move from T+2 to T+1 has taken us almost seven years.”
That being said, he’s confident that SS&C’s outsourcing solutions will continue to help clients “seamlessly adapt” to, and be better equipped for, any changes on the horizon.
The service “is based on [SS&C’s] proprietary technology, which has best-of-breed integration with major trading matching utilities,” facilitating straight-through trade confirmations and allocation delivery, he explains. TMSS’ “highly flexible operational model” makes it adaptable to specific market, product and recipient requirements. TMSS can automate and track both market and settlement statuses, Patel continues, and clients are given a transparent view of settlement and confirmation processes in real time. This is accessible via SS&C’s online portal, which aggregates data from matching utilities, custodians and prime brokers to create a unified view of a trade’s lifecycle.
A well-oiled machine
As of June 2023, the service had more than 150 clients. As the US market gears up to T+1 implementation, expected to go live in May 2024, a variety of services and solutions are on offer to help firms to prepare; one way in which TMSS stands out from market competitors is its “very low entry barrier to clients who are looking to enhance their post-trade functions through outsourcing,” Patel says.
Considering the shift, “the operational impact is pretty widespread,” Patel remarks. He anticipates straight-through processing and improved workflow efficiency in the post-trade space as the country takes this step, with these becoming “must-have items” in the new climate.
Outside the US, there are concerns around the impact that the shift could have on international trades, with the potential for fragmentation and increased settlement fails putting many market participants on edge. It’s an area that SS&C has honed in on, with TMSS “enabling international clients to match, allocate, affirm and communicate trades on trade date.”
This is achieved, in part, through the 24-hour service team that TMSS users gain access to. The team “ensures that SS&C’s international clients have proper coverage during US hours. They monitor and make sure that all trades are matched and settled within the market cut off, and they are able to quickly resolve any issues that may slow the process down,” Patel explains, “acting as an extension of the client’s team.”
Using the service, any mismatches that occur outside of local hours can be resolved by SS&C’s team on behalf of the investment manager, allowing for round-the-clock operations without the need for a constant in-office presence.
Outsourcing such as this continues to be a popular option for managers as they face increased regulatory demands, rapid technology evolution and, of course, reduced settlement cycles. “While we cannot predict any decline or increase in in-house development, we have definitely observed that through outsourcing, clients are able to prioritise their technology resources and redeploy their development dollars to focus on what matters to them — generating alpha,” Patel reports. Although it’s difficult to predict which way the wind will blow, this approach is proving successful across the industry.
Moving parts
As part of SS&C’s broader middle-office administration offerings, TMSS’ offering is compatible with the firm’s other fund services products. “Since this solution listens to the same trade messages as our existing fund services ecosystem, it’s very easy for our existing clients to integrate this service,” Patel explains. Additionally, “it does not require a long implementation cycle; it acts as a plug-and-play solution.”
Those already using SS&C’s services can quickly benefit from “a high level of operational synergies,” Patel adds. One example is the ability to capture real-time statuses from various utilities, custodians and prime brokers. Using this data, “we can apply intelligent automation for issue resolution on T itself, greatly reducing the amount of time our reconciliation team is spending on T+1 to review cash and position breaks.”
Conducting work on T “has a significant impact on downstream reconciliation and net asset value delivery,” Patel continues. “Those are going to be much cleaner, given the pre-work that we are already doing during the matching and settlement cycle.”
For existing SS&C clients, adding TMSS to their operations is easy. Taking a modular approach to outsourcing operations is a common practice, Patel says. “If a client is moving away from an existing service provider, then we would see a ‘big bang’ approach. But if a client is doing a lot of their functions in-house, then they may start by outsourcing activities with the biggest pain points and later decide to outsource other functions as they get comfortable.”
Soothing the pain
Pain points in a shortened settlement cycle are numerous. “From a matching and settlements perspective, one of the major pain points that the buy-side firms are facing is that they will have less time to process trade confirmations, allocations and affirmations compared to what they have today,” Patel affirms. A review of communication practices is essential, he advises. “Clients need to ensure that they follow a straight-through approach, and that their custodians and prime brokers are not resorting to manual touch points in order to settle trades on their behalf.”
It’s not all gloomy skies, though; Patel expects T+1 to bring a reduction in margin requirements, manual touch point risk and operational risk as firms automate their post-trade processes. Costs will drop, too, as technology conducts operations that currently require human intervention.
As for what TMSS can offer, “our solution is aligned with the best industry practices for T+1 readiness,” Patel assures. Standard settlement instructions are systematically maintained in order to reduce the risk of delays, and clients can outsource to the business’ straight-through matching and affirmation workflow using industry standard utilities.
Keeping it clear
Another key issue to be considered ahead of T+1 is the lack of transparency around settlement fails. Numerous industry participants have highlighted the lack of clarity around why a trade fails, something that TMSS wants to improve in the next enhancement to its central portal.
“We’re developing an innovative approach called Watchlist,” Patel reveals. Trades that require attention will be categorised under ‘critical’, ‘warning’ or ‘monitor’, with all unconfirmed and unsettled trades presented in a hierarchical view to ensure responsible parties are prioritising resolution.”
By categorising and listing unsettled and unconfirmed trades by urgency, “clients can see their priority for the next hour, for the next six hours, for the next day. They can scan through and figure out where their highest risk is.”
Beyond just a to-do list, Watchlist will be able to identify what’s going wrong in a trade and allow clients to see exactly what they, their stakeholders and their service providers need to do next.
“They will know exactly what is going on, understand who the responsible parties are for a trade failing and will know if they need to do something, This is a major enhancement that we’re looking to roll out,” Patel confirms. “I think the level of transparency it provides is going to help clients tremendously.” Patel explains.
TMSS may be ready to go for T+1, but what about T+0? Settlement cycle compression places progressively greater pressure on operations as time goes on, with firms already under strain from regulatory pressures, technology modernisation and a volatile macro environment. In regard to timeframes, “it’s hard for us to predict anything,” Patel comments. “It took the industry five years to move from T+3 to T+2. To move from T+2 to T+1 has taken us almost seven years.”
That being said, he’s confident that SS&C’s outsourcing solutions will continue to help clients “seamlessly adapt” to, and be better equipped for, any changes on the horizon.
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