[ A D V E R T O R I A L ]
Towards a no-touch
post-trade workflow
DTCC ALERT is a web-based global database for the maintenance and communication of account
and standing settlement instructions (SSIs). Bill Meenaghan, an executive director for DTCC Product
Management discusses developments in ALERT over the past year as well as in other DTCC services.
When we spoke at the end of 2017, there
were several new developments in the
offing. How have they progressed?
That’s true; and we’ve done a lot this year,
particularly in relation to custodians,
taking several steps from product design
towards client implementation.
One of the new capabilities you mentioned
for 2018 was an SSI auto-select feature. Is
that now available?
Yes. Our ALERT Key Auto Select (AKAS)
feature is now available in the cloud.
It has just gone live and is our one of
DTCC’s first cloud-based services. We
expect clients to start deploying in early
2019. AKAS enables DTCC to derive
country and security types based on the
security identifier, such as ISIN, CUSIP or
SEDOL of a security. The service can then
pick the appropriate SSI for the transac-
tion concerned. Clients can either default
to that standard choice or, if they prefer,
add rules to choose a different SSI.
The aim is to reduce settlement errors;
specifically those that are due to the
wrong SSIs being used. We estimate that
a good portion of the 20% of settlement
fails that the industry sees are due to
an incorrect SSI being selected. The
resources currently employed to manage
these types of pre-settlement and fail
management processes are significant.
However, the rules that we’ve introduced
in ALERT can largely reduce these types
of fails and help firms keep costs down.
It adds settlement certainty to the pro-
cess as both sides agree where a security
will settle.
A major focus of ours is in enabling,
through the use of our services, a no-touch
processing workflow - the goal of which
is to extend trade matching, enrichment,
and settlement notification capabilities
to reduce exceptions and support the
goal of minimal touch processing. This
will provide an end-to-end market utility
workflow to facilitate trade settlement
across asset classes. Instructions for
settlement can flow directly from a
match or affirmation, eliminating the
need to separately instruct and then
match settlement data. Essentially, the
system leverages settlement information
in ALERT and creates pre-matched
settlement instructions from the trade
match between the broker-dealer and
investment manager.
This year, we’ve also seen a growth in
the client base for the ALERT Global
Custodian Direct (GC Direct) workflow,
which we introduced in late 2015. This
helps to automate the management and
flow of SSIs between the custodian and
the investment manager, using ISO 20022
compliant messages. It also allows custo-
dians to manage settlement instructions
on behalf of their buy-side clients, which
has resulted in a significant reduction in
SSI-related fails. There are essentially
two data flows that concern us: from the
custodian to the investment manager
and from the investment manager to the
executing broker. Clients who’ve moved
onto GC Direct have seen a measurable
drop in SSI related fails and an increase in
straight through processing (STP). Given
the scale of a global custodian’s opera-
tions, an increase of even a few percent-
age points in STP translates into consid-
erable cost savings. Some have achieved
fail reduction rates of over 50%.
Your area of interest seems to be moving
downstream.
We’re continuing to move beyond our
traditional focus on post-match, pre-set-
tlement. We’ve launched a product this
year called DTCC Exception Manager, a
platform to publish, view and communi-
cate on exceptions throughout the trade
lifecycle process and that supports all
securities transactions globally. In 2019,
we are aiming to launch capabilities
around settlements management which
will allow us to follow transactions all
the way through the trade lifecycle. The
industry’s current post-trade processing
for institutional securities transactions
from trade matching to trade settlement
provides multiple opportunities to further
reduce costs and risk.
Winter 2018
globalcustodian.com
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