For the past two decades, the focus of financial markets has been on the front office for efficient execution of trades and speed of delivery. Light is now being shone on the post trade landscape and on the need to automate back office processes to enhance front office performance.
Ronn Baker, Baton Systems’ Senior Director of North American Sales, explains how interoperability across all asset classes is essential as T+1 looms and industry demand for immediate settlement increases.
As I’m sure many financial market professionals would agree, booking a transaction is relatively easy, in fact, it’s increasingly done in a fully automated manner – it’s the post-trade environment that’s fraught with problems. Disparate processes, disconnected and siloed platforms, and blind dependency on isolated workflows are among the issues faced. My own industry contacts estimate that 80% of operational time is spent solving post-transactional problems such as settlement delays, fails, beneficiaries claiming non receipt, payments released without proper instructions, or (unknowingly) without proper funding being in place. The list goes on and on, but the story is always the same. The post-transaction landscape is vast and is increasingly acting as a brake on business success.
Many organisations lack the tools to be able to connect siloed businesses and provide a single view of activity. But to operate efficiently, a capital markets business needs full visibility of its inventory and obligations: that’s to say of its balances in nostro accounts, at custodians, at CCPs, and so on, combined with completed and outstanding obligations for the value date in question.
Helping capital markets businesses to help themselves
With the industry moving towards T+1 and looking beyond this towards immediate settlement, firms currently relying on a range of counterparty-specific manual processes and legacy systems are facing a huge challenge. In the absence of true interoperability, faster payments mean faster problems, disastrous bottlenecks, and a complete halt of immediate settlement services. In short, the existing market infrastructure can work only if there is complete end-to-end connectivity.
Although the overall market infrastructure is often blamed for being cumbersome and inefficient there is plenty that individual firms can do to help themselves by automating workflows and providing a fully visible, streamlined environment for all stakeholders that is agile enough to meet new industry requirements.
Firms need a top-of-the-house view of their available assets and to be able to highlight the areas requiring attention. These might include likely margin calls, a low balance in a nostro, or a high-value payment where a customer or counterparty has not yet met their obligation.
“With the industry moving towards T+1 and looking beyond this towards immediate settlement, firms currently relying on a range of counterparty-specific manual processes and legacy systems are facing a huge challenge”
Baton Systems: the product-agnostic solution
Baton’s technology allows all of these details to be consolidated and normalised in a single view for cash settlements (whether FX or otherwise) as well as collateral obligations for cleared derivatives, covering the full range of cash and securities.
Baton is asset agnostic and focuses on making complex workflows simple and seamless by aggregating and normalising the underlying data and then automating the workflows and providing transparency and analytics for better decision-making. Our technology allows users to streamline post-trade workflows with a level of automation, flexibility, and transparency that is lacking for nearly all market participants today.
In short, It’s not about the underlying reason for the movement, but more about the safe, efficient, and real-time process of getting the right asset to the right place at the right time.
“Our technology allows users to streamline post-trade workflows with a level of automation, flexibility, and transparency that is lacking for nearly all market participants today”
Live and proven
Baton is well-known for Core-FX™, our FX PvP settlement solution. In November 2022 we began orchestrating, in production, the PvP settlement of the offshore Renminbi (CNH), the first time that the 5th most traded currency (and the most widely traded currency that is ineligible for CLS) has been settled using a PvP-safe settlement mechanism. This is an achievement of which we are very proud and a demonstration of our flexibility and agility. Our solutions handle more than $15 billion of daily movements and, since our inception, have facilitated over $10 trillion in settlements.
Banks are recognising the need for a technology partner with a track record in creating end-to-end connectivity. Baton is a proven strategic partner: our technology doesn’t require a rip and replace of existing platforms but identifies the missing pieces needed to streamline workflows, helping firms to realise efficiencies and to save time to market.
At Baton, we recognise that the post-trade processing of assets is complex and burdensome for organisations. Clients are coming to us because they know that we solve the problems they are facing no matter what the asset class – we’re evidencing it right now in production and working with some of the world’s largest financial institutions.
“Baton is well-known for Core-FX™, our FX PvP settlement solution. In November 2022 we began orchestrating, in production, the PvP settlement of the offshore Renminbi (CNH), the first time that the 5th most traded currency (and the most widely traded currency that is ineligible for CLS) has been settled using a PvP-safe settlement mechanism”
An efficient back end determines front-end success
As the industry moves towards immediate delivery, the focus of the front office is on meeting market demand in order to keep and retain clients. But front office performance is dependent on everything that happens post-trade.
Efficient post-trade processes have an impact way beyond the back office. For a bank, they are a major influence on the front office decisions that need to be made to be effective in servicing clients, seen as a competitive advantage and making a business successful. Ultimately, if firms don’t fix their back end, they’ll never be as successful as it’s possible for them to be on the front end.
“For a bank, they are a major influence on the front office decisions that need to be made to be effective in servicing clients, seen as a competitive advantage and making a business successful”
I hope you have found this blog useful in explaining how Baton’s product-agnostic solutions can automate and simplify post-trade processes, giving firms full control over their assets across business silos and enhancing their front-office performance. To learn more, please don’t hesitate to contact me at [email protected]