Cognizant Research Center  February 2011 Trade Management  The Case for More Functional  and Utility-like Systems
Effects of the global financial crisis on post-trade operations of buy and sell side firms <ul><li>Asset managers  tilting...
Asset Managers Factors Pushing for Improved Trade Management Systems <ul><li>Inability to handle the growing volumes of ex...
Custodians <ul><li>Face demands for greater transparency and real-time reporting from asset managers </li></ul><ul><li>Hav...
Brokerages <ul><li>Executing trades over the phone will become a thing of the past </li></ul><ul><li>OTC derivatives movin...
Cloud-based Utility-like Trade Management Systems Financial Services, a clear leader in cloud adoption across industries, ...
Before Making the Move to Cloud <ul><li>Perceived loss of control and decreased customization </li></ul><ul><li>As operati...
Before Making the Move to Cloud <ul><li>Multi-entity, multi-currency and multi-instrument processing </li></ul><ul><li>Sup...
Akhil Tandulwadikar Cognizant Research Center Aashish Chandorkar Cognizant Business Consulting For more information, pleas...
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Trade Management - The Case for More Functional and Utility-like Systems

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Trade Management - The Case for More Functional and Utility-like Systems

  1. 1. Cognizant Research Center February 2011 Trade Management The Case for More Functional and Utility-like Systems
  2. 2. Effects of the global financial crisis on post-trade operations of buy and sell side firms <ul><li>Asset managers tilting towards greater automation and outsourcing of post-trade activities as they face relentless demand for generating greater alpha while cutting costs and increasing efficiencies </li></ul>Custodians are reviewing their service models with a view to incorporate greater levels of transparency Brokerages looking for solutions that will help them comply effectively with new regulations Cloud-based, utility-like trade management systems will strengthen the financial muscles of capital market firms by providing them with the much needed flexibility to focus on core operations
  3. 3. Asset Managers Factors Pushing for Improved Trade Management Systems <ul><li>Inability to handle the growing volumes of exotic securities has lead to a fail-rate of more than 30% in trade confirmation. </li></ul><ul><li>Complex, new trading strategies and expansion into new asset classes and markets is ratcheting up the pressure on middle- and back-offices. </li></ul><ul><li>Reliance on manual processes in many day-to-day operations, such as trade verification has created long-standing inefficiencies </li></ul>Inefficient Trade Management Systems <ul><li>High incidence of trade failures </li></ul><ul><li>Trade capture errors </li></ul><ul><li>Lengthy repair queues </li></ul><ul><li>Asset manager on-boarding time </li></ul>Post-trade Pain Points <ul><li>Cost savings </li></ul><ul><li>Improved quality </li></ul><ul><li>Assessing internal capabilities and expertise </li></ul><ul><li>Focusing on core competencies </li></ul><ul><li>Rationalizing technology </li></ul><ul><li>Supporting new product launches </li></ul>Imperatives for Asset Managers <ul><li>Reduction in total cost of technology ownership </li></ul><ul><li>Non-value adding operations can be eliminated </li></ul><ul><li>Help leverage economies of scale, and focus on high-value activities </li></ul><ul><li>Ensure access to latest technology </li></ul><ul><li>Eliminate the risk of acquiring talented staff </li></ul><ul><li>Helps make a clear measure of risks depending on the nature and criticality of the component outsourced </li></ul><ul><li>Create a level playing field by providing smaller players access to the best technology </li></ul>How Hosted Solutions Can Help
  4. 4. Custodians <ul><li>Face demands for greater transparency and real-time reporting from asset managers </li></ul><ul><li>Have expanded into new geographies. On-boarding same client on different platforms is time consuming </li></ul>Monetizing Non-Strategic IT Assets <ul><li>Have built global platforms for back-office outsourcing </li></ul><ul><li>Despite redundancies, these platforms can be used to provide commoditized post-trade support </li></ul><ul><li>High volume, low-return processes can be executed with an external service provider in a cloud environment </li></ul>Custodians can Leverage their Outsourcing Platforms Through Cloud
  5. 5. Brokerages <ul><li>Executing trades over the phone will become a thing of the past </li></ul><ul><li>OTC derivatives moving to exchanges will mean systems need to be upgraded to meet compliance requirements </li></ul>OTC Regulations Push for Improved Systems <ul><li>Brokerages have had to pay huge fines for failure to comply with SEC requirements to preserve records </li></ul><ul><li>Putting these records on the cloud will help them save money </li></ul>Clouds Can Help Brokerages With Regulatory Compliance
  6. 6. Cloud-based Utility-like Trade Management Systems Financial Services, a clear leader in cloud adoption across industries, next only to technology sector (%) <ul><li>A survey by Mimecast found that 68% of financial services firms want to move more activities to the cloud as their initial rollouts helped overcome fears such as security concerns, loss of control and performance worries </li></ul><ul><li>IDC estimates that the number of trading firms using SaaS solutions has increased by 40% during the past four years </li></ul>Cloud Adoption High in Financial Services
  7. 7. Before Making the Move to Cloud <ul><li>Perceived loss of control and decreased customization </li></ul><ul><li>As operational risk moves to the provider, their expertise in the field becomes crucial </li></ul><ul><li>Provider’s prioritization will drive the introduction of new technologies </li></ul><ul><li>Once outsourced, bringing a function back in-house could be difficult due to loss of expertise </li></ul><ul><li>Poor financial viability of the vendor could create serious risks </li></ul><ul><li>Shift to variable cost model could result in higher costs if volumes grow significantly </li></ul>Understand the Risks <ul><li>Conduct a thorough analysis of the speed and costs associated with choosing a vendor </li></ul><ul><li>Evaluate your core competencies before moving to the cloud </li></ul><ul><li>Analyze the vendor’s geographic reach and the ability to cater to multiple teams simultaneously </li></ul><ul><li>Optimize trade management to reduce processing costs in the later part of the trade life cycle </li></ul><ul><li>Demand transparency from the vendor over risk management </li></ul><ul><li>Determine the clear operations risk profile to ensure overall control </li></ul>Perform Due Diligence
  8. 8. Before Making the Move to Cloud <ul><li>Multi-entity, multi-currency and multi-instrument processing </li></ul><ul><li>Support various messaging protocols (ISO 15022, ISO20022, XML, etc.) </li></ul><ul><li>Integrate multiple channels and formats </li></ul><ul><li>Tailoring of automation, processing and information delivery to user requirements </li></ul><ul><li>Message validation, business validation, template validation and outbound message validation </li></ul><ul><li>Workflow engines that allows exception management through calendar based user / manager dashboards </li></ul><ul><li>Risk dashboard to present data / transactions based on user configurable risk profiling </li></ul><ul><li>KPI dashboards to monitor performance </li></ul><ul><li>Extensive report generation and delivery capability </li></ul><ul><li>Ability to integrate with third-party reporting tools </li></ul>Look For…
  9. 9. Akhil Tandulwadikar Cognizant Research Center Aashish Chandorkar Cognizant Business Consulting For more information, please visit: http://www.cognizant.com/InsightsWhitepapers/Trade-Management-Systems.pdf Thank you

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