In today’s complex and fast-moving markets, firms need the ability to quickly adapt their legacy post-trade systems to new products, processes, and policies without resorting to ‘rip and replace’. Ronn Baker, Baton Systems’ Senior Director of North American Sales, explains why interoperability is fundamental to a firm’s client retention and market viability.
Markets businesses at many firms have evolved organically as new products and markets have come into play. Furthermore, many of today’s organisations are the result of one or more mergers or acquisitions. Consequently nearly all firms today operate on a complex infrastructure of legacy and siloed post-trade systems. No two are the same, and it’s not unusual for them to have been in place for decades.
Interoperability – the ability to connect different platforms and applications in a coordinated, automated way that eliminates manual interactions – allows new systems and technology like distributed ledgers to be introduced seamlessly and in a way that does not disrupt a firm’s existing processes.
With markets continuing to grow in complexity and speed, and initiatives such as T+1 and T+0 in the pipeline, the need for the efficient movement of funds and for faster, more accurate, automated and transparent processing is paramount. Ripping and replacing is rarely an option; rather, firms want to continue to operate with the variety of legacy systems that they have in place whilst planning for a carefully orchestrated and often long-term programme of system upgrades and retirement.
“With markets continuing to grow in complexity and speed, and initiatives such as T+1 and T+0 in the pipeline, the need for the efficient movement of funds and for faster, more accurate, automated and transparent processing is paramount”
Recognising the value of interoperability
There’s no doubt that financial institutions recognise the value of upgrading their technology to be able to handle post-trade requirements more effectively. Their aim is to grow revenue, reduce costs, and reduce risk – while at the same time delivering efficiencies.
A bank’s processes need to align with internal policies regarding credit risk, liquidity management, payment processing, and infrastructural safety and soundness. Upgraded systems need to interface smoothly with legacy platforms, processes, and policies.
Incremental business flows and asset classes continue to emerge at a rapid pace. Banks are assessing the impact on their processes of client demand for digital assets like stablecoins and tokenised securities. Firms know that If they can’t support these, there’s a real danger that clients will leave for other platforms.
Interoperability then, is critical to allow a bank’s legacy platforms to be able to communicate with new technologies and processes for new asset types, in order to be able to retain their clients and be viable in the market.
“Interoperability then, is critical to allow a bank’s legacy platforms to be able to communicate with new technologies and processes for new asset types”
How Baton’s interoperable technology transforms post-trade operations
Baton’s solutions support the complete end-to-end post-trade process.
We address this by focusing on visualising data that has been aggregated and normalised from multiple internal and external sources, assessing needs through integrated business rules, and using the information for safe payment processing. Baton’s domain model tracks state changes across the whole post-trade process, that’s to say, across the platforms and the various unintegrated siloes within an organisation, as well as across business lines and products.
Baton Core-Payments® is able to provide functions such as netting and optimised settlement processes across multiple business units. The platform does this in conjunction with the real-time reconciliation of settlements and the automated orchestration of controlled settlements. By removing those manual processes that don’t deliver the discretionary value that justifies a human touch, Baton is able to give firms control over the whole payment and settlement process across business lines.
Core-Payments provides an aggregated and normalised view of the data from multiple, disparate, siloed platforms. Configurable manual hold/release rules can be deployed and maintained directly through the platform. Smart workflows (similar to a smart contract) can be implemented and can be conditioned – for example, to dictate that a payment gets released to a counterparty only upon receipt of their payment.
“Core-Payments provides an aggregated and normalised view of the data from multiple, disparate, siloed platforms. Configurable manual hold/release rules can be deployed and maintained directly through the platform”
It’s technology that reduces operational pressures,minimises errors and fails and provides the data and alerts required to allow for rapid remediation of operational issues.
Working in conjunction with legacy platforms, Baton is a proven strategic partner that identifies the missing pieces needed to streamline post-trade workflows, helping firms to realise efficiencies and save time to market.
The ability to look holistically at risk controls, rather than relying on siloed views helps firms to manage costs and risks. It also proves very effective for funding and liquidity management.
“The ability to look holistically at risk controls, rather than relying on siloed views helps firms to manage costs and risks”
Pathway to a full upgrade
The ability to layer in new technology without needing to rip and replace allows firms to benefit from Baton’s solutions without having to undergo a very disruptive rip-and-replace process. Ultimately, a Baton deployment creates a pathway for firms seeking to retire their legacy platforms in a controlled and managed way – thereby further reducing the expense of maintaining those platforms.
The front-office impact of back-office problems
Interoperability is not only a back-office problem. Post-trade processes can significantly influence front-office decisions such as the cut-off time for a same-day payment, the ability to trade with a counterparty without settlement lines, or how and when a payment is released.
“Post-trade processes can significantly influence front-office decisions”
As the industry moves towards immediate delivery, the front-office is focused on retaining clients and growing market share whilst continuing to find cost efficiencies and, all the while, running a safe business. Front-office performance is fully dependent on the entire post-trade process.
“Front-office performance is fully dependent on the entire post-trade process”
Ultimately, firms that lack fully integrated and streamlined processes – front to back – will continue limping along as their competitors pass them by.
I hope that you have found this blog useful in explaining how Baton Core-Payments can transform a firm’s post-trade processes without the need to ‘rip and replace’. To learn more about Core-Payments please don’t hesitate to contact me at [email protected]