As the “go live” date for the T+2 accelerated settlement initiative draws near, everyone is busy preparing their firms for the shortened settlement period. Assuming you have downloaded the T+2 Playbook from SIFMA, you probably already know about the main impacts the new policy will have on the broker/dealer community, which can be categorized into two buckets:
- Operational Impacts
- Firm Funding & Risk Management Impacts
The Firm Funding & Risk Management effects are a deliberate target and desired impact of the T+2 initiative. The main stated goals are to reduce credit and counterparty risk, increase market liquidity, lower collateral requirements as well as enhance global settlements and capabilities.
The last stated goal—drive new operational efficiencies—relates to the first category of impacts, Operational, and will be the primary focus of this blog post.
Driving new operational efficiencies will hit the obvious players that are directly dealing with everything related to settlement:
- Trade Breaks, Trade Matching, Trade Affirmation
- Stock Record Break reconciliation
- P&S reconciliation
- R&D processing as it pertains to physical certificates
- Options Exercise and Assignments
But, what you may not be thinking about are the other areas within operations that your organization could make more efficient. And, furthermore, what are the benefits of improving efficiency in these areas? Operations, by nature, is an exceptions-based world that requires a level of hand-holding to clean up issues. Whether you are looking at settlement-based areas or peripheral areas, the key is to analyze your current exception handling process for patterns and opportunities for improvement.
Most personnel within the Operations staff will remember, or still live in the days of reviewing pages and pages of exception reports looking for the handful of exceptions that are actionable right now. Well, those are the processes that need to change. I don’t recommend you change all at once because that could be pretty daunting. Instead consider where your highest touch, highest value exception processes are – either by volume or by complexity or some intersection of the two – and what can be done to improve these processes.
As you evaluate these processes, look for innovative ways to improve. Maybe you take a small step and bring your current paper-based exception review process into a GUI environment to make it easier to filter and sort the pages of exceptions. Perhaps you find opportunities to remove non-actionable items from your report before they get there, so you’re spending less time on non-actionable items. Or, maybe you can improve the exception process to incorporate the business intelligence that is used to manually review the exceptions and build a better mousetrap.
With the right level of effort and appropriate capabilities, a good platform could serve up just the items you need to act on, age exceptions if needed, route to other departments that may need to take action to help resolve the exception, capture a full audit trail, and give you the ability to integrate to your books and records to fix the exception without going to another platform. No swivel chair.
Increasing automation in this exception-based world is very cost effective, will increase productivity and job satisfaction, and could even transform your operational experience. In addition, you may find yourself with the ability to take some of your existing resources and repurpose them to focus on other priority tasks, possibly reviewing the impacts of the DOL Fiduciary Standard on your firm.
To learn more about how IFS can help your firm achieve operational efficiency, contact us by clicking the button below. If you’re attending SIFMA, we hope you’ll attend the workshop “Deliver the Operational Excellence Your Wealth Management Client Deserve…Cost Effectively” to hear from IFS’s Randy Barnes and Thomson Reuters’ Mark Berkhahn (Head of Product Management to Beta Host) and Ron Koenig (Head of Wealth Propositions) @ 3:30 pm on Tuesday, May 3.