[ I N D E P T H | R E G U L A T I O N ] and more straight forward .” Seven months into the SDR and it seems that more time has been spent on ensuring the processes are correct , rather than focusing on the whole purpose of the regulation : reducing settlement failures .
Automate to accumulate ? Looking at the root causes of fails in the market , there is hope that the situation the new mechanism , several custodians have seen an approximate 20 % reduction in SSI-related fails , a figure that continues to rise as the community grows . But the issue remains that a significant portion of the market yet to leverage automated solutions when it comes to SSI communications . “ The more channels are automated , the more there is agreed up front ,” says
“ To only give yourself a couple of months window to get ready for a huge impact of the post-trade world across European markets is a large task , to say the least .”
MATT JOHNSON , DIRECTOR OF ITP PRODUCT MANAGEMENT AND INDUSTRY RELATIONS , DTCC of months window in order to get ready to meet this huge change in the post trade world across all European markets is a large task , to say the least .” Speaking to those in the industry , it does appear that that process has begun with participants becoming more familiarised with the processes . However , there ’ s still a long way to go . “ I don ’ t think it ’ s going to magically go away is the sad truth of the situation ,” adds Cassells . “ Challenges are being driven by things like CSDs not populating SWIFT messages in a consistent way . There needs be a real behavioural change at the CSDs to fully eradicate the problems ; they ’ re getting a little bit better , but it needs to be made cleaner can be improved . One the of predominant causes of fails is discrepancies between standard settlement instructions ( SSIs ) where there is no automation . Analysis from EquiLend in February found that at least 43 % of potential fails are related to incorrect SSIs . Behind this stark figure is a complicated system , with participants often having a choice of up to 30 different SSIs in any given market . Within the SSIs themselves , firms must navigate a labyrinth of complexities - entering international banking details with the correct format , ensuring participant details are precise to the letter . “ We have to look at how we can build a better , more robust practice to ensure that SSIs are correct at every point throughout the transaction lifecycle ,” asserts Johnson , who explains that DTCC has been introducing new models and structures to its global SSI repository , with a view of driving SSI owner to take responsibility for the accuracy and the validations around SSIs . “ It comes back to the custodian network ,” continues Johnson . “ Although investment managers , and to some extent the broker dealers , are using their SSIs to set up the trade – they are actually owned by the custodians , who are undertaking the delivery , receipt and payment .” By giving ownership to the custodians themselves , DTCC eases the burden on the buy-side and broker dealers – with significant success . Since incorporating
Mohindra . “ With automation , at the point of trade , a lot of the required data for the enrichment is there immediately because you can look it up and have the correct reference data . As soon as you start manually intervening in that , then expect an email with the allocation splits and other data , these things start to disrupt and delay the settlement process .” Johnson adds that the European market could learn from its North American counterparts on this front . For example , in the US derivatives space , the regulator mandated that documents be confirmed electronically using specific automated platforms to great success , with the securities market expected to follow suit with the upcoming reduction of the settlement cycle to T + 1 . He says : “ In the US , the SEC has now made some strict recommendations that we do believe will come to fruition in a T + 1 environment , whereby the entities transacting in securities will need to confirm , allocate and agree to everything related to that transaction on the same day its executed , in order to achieve T + 1 settlement . “ It would be great to see this happen in Europe , where the failure rate is higher than other jurisdictions around the globe , especially as we have the mechanisms to agree the requisite information on the same day the trade is executed .” Elsewhere , automated solutions such as AccessFintech ’ s live settlement solution , have yielded significant results
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