B.I.S.S. Research, the exclusive research company offering the elite industry accreditation of systems & services for the financial services sector, today published a discussion paper on the high costs and inefficiencies of the matching process in post-trade operations in both buy-side and sell-side financial services firms. The paper further questions the financial viability of central matching compared to the flexibility and return on investment of bilateral matching. This is especially pertinent as the securities industry moves to a shortened settlement cycle.
The paper outlines the evolution of post-trade matching and concludes that the current markets are inflicted with well-established operational matching processes and procedures that are impeding moves towards industry efficiencies and that enforce unnecessary cost burdens on all type of financial services and all products. The paper has been authored to create a discussion amongst senior professionals within financial services firms and urges strongly that all firms undertake a review of their existing matching capabilities. It questions if they would be better serviced operationally and financially, with alternative matching service suppliers or greater investment in developing internal matching technology to rationalise and streamline their matching process and to reduce costs.
Gary Wright, C.E.O., B.I.S.S. Research and creator of the B.I.S.S. Accreditation and author of the discussion paper said “This paper was a delight to write in many ways as post-trade transaction confirmation and matching has played a key role in my city career. In fact I might be one of the very few people still active today that manually matched trades dealt on the Stock Exchange floor at Blossoms Inn. Later I was a founder member of the Industry User Group that specified Electronic Trade Confirmation (ETC) and a founder member of European ISITC, which helped specify SWIFT messages that culminated in ISO15022. So I could easily describe the evolution of post-trade matching and comment on today’s rather convoluted and expensive post-trade matching operation.
What is clear to me is that all types of Financial Institutions need to look very closely at their post-trade matching costs and operations and examine whether their capabilities will suffice for moves to T+2 or even shorter. Post-trade matching is a vitally important function in the market settlement process and there is a need for bilateral matching. Today a single transaction can be matched many times over and costs incurred at every stage, with some providers bundling the matching operation with associated services, so it is more complex than it needs to be. In the paper I layout the industry matching scene and provide a platform of issues and topics to be debated in the expectation that financial services firms will take up the challenge and introduce superior matching operations at a greatly reduced cost.”
Bruce Hobson, CEO of Salerio said “We commissioned this discussion paper from B.I.S.S. Research because we believe that a fresh look at post-trade matching in the securities markets is required. Not since the early nineties has the securities industry had a concentrated review of the post-trading matching process, which culminated in the creation of some of the matching service providers we see today.
Time moves on, as does technology and for the modern market under regulatory scrutiny and economic stress, cost has come to the fore. So a reflection and a questioning of such an important function as post-trade matching is almost mandatory. The paper highlights T+2 as an industry-wide development and this certainly brings the capabilities of post-trade matching and any latency within settlement squarely into focus. We believe this paper is compelling reading and a perfect platform to introduce the Business Clinics project we are undertaking.”