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As the global financial crisis evolves, the requirement for improved risk management and ongoing cost reduction has been elevated from an operational issue to one of crucial strategic importance. That is the key message in a wide-ranging new white paper from SWIFT entitled STP – A new look at an old idea
The white paper highlights the fact that after 20 years of STP investment, buy and sell-side firms both believe that the post-trade environment still contains multiple opportunities to address efficiency gaps and meet operational risk management obligations.
The paper examines a range of problems currently holding up progress on STP and operational risk management – including the lack of uniform adoption of standards and inadequacy of STP for fixed income and new instrument types. It then suggests measures that can be taken immediately to address the high-priority problem areas, inviting input and involvement in industry-level efforts to help realise a new vision for post-trade processing.
These recommendations include a fuller and greater use of:
- Community-sourced standards
- Market practice guides that define the implementation rules of a given set of standards, for a given set of transactions.
- Simulation Testing and Qualification Service (STaQS) – a central application operated by SWIFT to enable customers, as well as partners, to test the compliance of their IT systems against published standards and market practice.
Fabian Vandenreydt, Head of Securities and Treasury Markets, SWIFT said: “Operational risk is no longer a dark art. It is one of the top-level concerns of securities operations management. Buy and sell-side players alike need the remaining problems in the post-trade process to be eliminated to ensure proper operational risk controls and to maintain the profitability of their securities businesses. So much has been done over the past 20 years, but there is much still to do. The building blocks exist – what’s needed now is the community-level commitment to harness them.”
He added: “There is a blueprint for a post-trade process that is sufficiently robust. It can be outsourced, in-sourced, sliced and diced so that the best mix of provider and self-service options is available to any firm at any time.”
The SWIFT white paper is available for download on SWIFT.com.
