The Future of Post-Trade Processes
The innovations made in the technological sector have transformed and accelerated the services delivered by financial markets. Technology has empowered market participants to discover and implement tools that aid in the streamlined functioning of financial affairs. The post-covid scenario reaffirmed the importance of capital market technologies and the need to expand capabilities to sustain even during volatile periods.
When it comes to trading, the front-office processes are far well-equipped than the post-trade processes. FIX protocols and fintech products have facilitated a faster proceeding of capital market affairs, while post-trade operations are notably underrepresented. In 2019, a panelist from the FIX Trading Community's Americas Trading Briefing session famously noted that the back-office is the FIX protocol's white whale, where conversations and innovations are minimal.
Experts highlight three elements that cause such sluggish improvement in the post-trade sector.
- A lack of front-to-end protocol facility
- The financial implication of innovating and implementing new technologies
- Slow and incompatible systems pose a risk to operational resilience
The onset of the pandemic has been a great eye-opener concerning post-trade operations, where the need and urgency to reinvent became imperative. Capital market industry leaders have begun to explore new possibilities and build unique solutions with the post-trade challenges at the core. Experts identified the pinch points in the post-trade processes, the root causes, and the right set of solutions that overcome such challenges.
The major pinch points included:
- The expense revolving technologies
- The complexity and comprehensiveness of internal processes
- The lack of a unified processing pathway in the industry
- Regulatory and compliance challenges
- Managing cyber risks and threats
Market leaders have constructed solutions that overcome the above challenges and improve the operational efficiency of back-office teams. The future of post-trade processes leans on the innovations made today that slowly yet steadily transform the dynamics of post-trade affairs. The intricate layers in processing multiple post-trade activities require the technological and technical elements to bolster impactful changes. It is imperative to standardize data and methodologies across all trade lifecycles, asset classes, and firms. It ensures that the post-trade solutions are seamless, devoid of risks, and efficient.
Post-trade processes have started to occupy the center stage as the solutions designed by various market entities are becoming prominent. The notable benefits of transcending post-trade activities with the aid of new tools and improved expertise include:
- Reduce the operational costs of processing trade transactions
- Adapt to innovations quickly, thereby staying ahead in the market
- Improve real-time capabilities
- Enhance functions such as settlement allocations, asset servicing, management of real-time data, and back-end accounting
- Reduce cost-per trade and manage the trading activities
- Integrate with legacy systems to provide a smooth transition of functioning methods
- Post-trade automation to manage trade lifecycles efficiently
- Multi-office support that links the front, middle, and the back offices internally
With the FIX community channeling its focus on transcending the post-trade activities, the future looks promising for market players to thrive. When the post-trade processes are streamlined, well-equipped, and made more resilient, it decreases the overheads involved, decreasing the cost of financial services.
Sensiple, as a leading capital market services provider, renders post-trade support for market players and financial institutions. Click here to check out our range of FIX products and capabilities.