Download the report here.
London – November 17, 2021: Lack of data standardisation, outdated software and fragmented data sources are the biggest barriers to efficiency in derivatives post-trade reconciliation, a study by Acuiti has found.
The study, which was commissioned by software provider Kynetix, surveyed or interviewed over 60 sell-side firms operational in the derivatives market and found that the reconciliation process was an increasing focus for senior executives as they seek to reduce risk and improve client service.
The results of the study are set out in a new report, Derivatives Reconciliations: “Good enough” is no longer good enough, which was released today.
The report provides a deep-dive analysis of the latest trends regarding derivatives reconciliations software, a benchmark of levels of automation and efficiency across different company types and explores the impact that investment in automation has on efficiency.
The key findings are:
- Investment in reconciliation software is on the rise driven by increased regulatory oversight and weaknesses exposed during periods of volatility during 2020
- A lack of data standardisation caused by multiple data symbology standards is the biggest barrier to efficient reconciliation processes
- 81% of tier 1 banks use spreadsheets as part of the core reconciliation process compared with 19% of brokers and non-bank FCMs
- 19% of tier 2 and 3 banks have more than 10 manual touchpoints in their standard reconciliation process
- 67% of brokers and non-bank FCMs had upgraded their reconciliation software over the past three years
The study also highlights the efficiencies and cost savings that can be gained from investment in the reconciliations process.
Of those that upgraded their reconciliation software over the past three years, nine out of 10 spent less than 10% of their total back-office budget on technology costs. This reduced to five out of 10 for those that did not upgrade.
The efficiency emanating from investment is also born out in the time it takes to reconcile. Of those that had invested, six out of 10 met the internal target for reconciliations to be completed more than 90% of the time compared with just over a third that hadn’t invested.
“After a sustained period of increasing regulatory burden, sell side firms are recognising the need to address outdated and overly manual legacy derivatives reconciliation processes. The heightened need to reduce reliance on key personnel skills, plus the pressing need to resolve exceptions faster, has meant that FCMs are seeking cloud solutions that deliver easy resolution, day in, day out, in the fastest possible time. We’re pleased to have launched HelloZero at this time to address these challenges” – Matt Dolton, CEO
“Over the past decade, volumes, the complexity of market structure and regulatory requirements that require efficient reconciliations have all increased substantially putting immense pressure on operations across the sell-side,” says Will Mitting, founder and managing director of Acuiti.
“All firms are targeting greater efficiency and automation but each faces unique challenges in realising these goals. While some smaller firms have been able to pull everything together into a ‘golden source’ with zero manual intervention, for larger firms the expanse and complexity of their operations means that reducing manual touchpoints and a reliance on spreadsheets can result in significant strides towards greater efficiency.”
Download the report here.
For more information, contact Will Mitting
Tel.: +44 (0) 203 998 9190
For media, contact Jake Smith at Brandex Financial
Tel: +44 (0) 7860 779802
EmailAcuiti – firstname.lastname@example.org
Acuiti is a management intelligence platform designed to provide Senior Industry Professionals in the Derivatives Industry with high-value insight into industry-wide performance and business operations. Acuiti provides a platform through which our exclusive network of Senior Industry Executives can share and source information on day-to-day operational challenges, providing them and their management teams with increased transparency and in-depth analysis to make more informed decisions and benchmark company performance. Financial Institutions benefiting from our services include Banks, Non-bank FCMs, Brokers, Proprietary Trading Firms, Hedge Funds and Asset Managers.
Financial software provider Kynetix, has launched a new cloudbased solution to help FCMs and brokers address the challenges found in reconciling listed derivatives. HelloZero has been built from the ground up to automate post trade reconciliation for ETD and OTC derivatives. It features advanced matching capability, workflow, case management and management information. For businesses, it offers reduced risk and lower cost, and can lead to improved relations between clients and brokers. With speed, accuracy and reliability, HelloZero ensures that, whatever the pressure, your reconciliations will be ‘all square by 9am’.