DTCC Outlines Path to Reduce Trade Failures, Increase Security and Efficiency of Markets
Automating delivery of standing settlement instructions (SSIs) is the clear direction as ALERT’s GC Direct points to the destination, now with over 1 million SSIs managed by custodians and prime brokers
New York/London/Hong Kong/Singapore/Sydney, April 17, 2019 ‒ The Depository Trust & Clearing Corporation (DTCC) announced the release of a new paper addressing issues of trade failures in the institutional post-trade marketplace where greater technology adoption could help with growing problems in an era of cost pressures, heightened regulatory requirements, and increasing cyber security focus.
Standing Settlement Instructions (SSIs) represent a significant proportion of trade failures, as missing or incomplete SSIs create one of the biggest pain points for firms. The significant number of manual touch points relating to SSIs during the settlement process sees trade data handled by many disparate systems from matching engines to counterparties and settlement organizations, while flowing across an array of market infrastructure facilitators.
The white paper, A Roadmap to Automation: How an SSI Utility Benefits All Participants, looks at the structural transformation underway in the capital markets and the need for industry consensus to ensure SSIs become fully automated.
From the efficiency perspective alone, a global failure rate of just 2 percent is estimated to result in costs and losses up to $3 billion. Beyond cost savings, automation can help address security concerns as sometimes communication still occurs via email instead of through secure networks. In fact, it is estimated that roughly half of institutional participants are sending critical SSI information manually rather than on a secure platform which is inefficient and introduces cyber security risk.
“Settlement processes are now attracting more attention as regulators require shorter and more certain settlement with the potential of penalties for noncompliance,” said Matthew Stauffer, Managing Director and Head of Institutional Trade Processing at DTCC. “Removing manual touch points in the settlement process will have a tremendously positive impact in efficiency and security.”
The move from manual to automated SSI processes, and ultimately to custodian-managed SSIs, is underway with more than 3,600 firms already leveraging DTCC’s ALERT platform. Using ALERT’s Global Custodian Direct (GC Direct) workflow, custodians and prime brokers can administer settlement instructions for their buyside clients with industry standard compliant messaging. GC Direct has just passed the milestone of more than 1 million SSIs now managed by custodians and prime brokers, where early adopters are reporting a reduction in fails of 40-50 percent.
With 45 years of experience, DTCC is the premier post-trade market infrastructure provider for the global financial services industry. From operating facilities, data centers and offices in 16 countries, DTCC, through its subsidiaries, automates, centralizes and standardizes the processing of financial transactions, mitigating risk, increasing transparency and driving efficiency for thousands of broker/dealers, custodian banks and asset managers. Industry owned and governed, the firm simplifies the complexities of clearing, settlement, asset servicing, data management and information services across asset classes, bringing increased security and soundness to financial markets. In 2017, DTCC’s subsidiaries processed securities transactions valued at more than U.S. $1.61 quadrillion. Its depository provides custody and asset servicing for securities issues from 131 countries and territories valued at U.S. $57.4 trillion. DTCC’s Global Trade Repository service maintains approximately 40 million open OTC positions per week and processes over one billion messages per month through its group of licensed trade repositories. To learn more, please visit us at www.dtcc.com or connect with us on LinkedIn, Twitter, YouTube and Facebook.