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Tip #7: Straight Through Processing

The Straight Through processing rate is one of the key metrics to consider tracking when identifying if an investment system is working efficiently.

Simply put, straight-through processing (STP) is an automated process with no manual intervention. For an investment system, this means the ability to capture transactions and send settlement instructions to custodians, counterparties, and clearing houses through SWIFT or proprietary settlement systems in a fully automated manner.

While STP recognizably applies to equities, fixed income, and other listed instruments, it can also be applied to posting payments for listed and OTC instruments. A full-fledged STP solution can include automating collateral movement, generating security lending activity, or automating any transaction which you may need triggered during the trade capture phase.

The best way to start is to take scope of where the system is working well and where it could be more automated. With a rich transaction audit trail, SimCorp Dimension makes it quite easy to map and collect data on who has touched a transaction during its lifecycle. Are users having to update transactions manually to enrich the trade or update the lifecycle? Understanding when and why a transaction is manually changed is key to improving your overall STP rate.

Tip: Query a month or more of transaction activity. Were they created and updated in a fully automated way or are users still creating and updating the transactions? Talk to the users. If we automate certain instruments or processes, what will give the biggest benefit? Many users become quick and efficient at doing manual work, but what is the operational risk of this manual process? Can trades fail to settle and cause financial and reputational damage?

Are some instruments more challenging to STP than others? What might have started out as a low-volume trading strategy that did not get much STP attention can cause a burden on Operations if the strategy is successful and grows. Having an STP strategy that is designed to automate all aspects of trade processing can ensure the system is ready to handle growing volumes as well as more complex trading strategies.

Even with the best STP rates, monitoring the process can be challenging. An STP solution can be built with exception-based monitoring in mind. Ensuring that the overall solution produces the metrics you need allow us to easily keep on top of any issues with the workflow.

Tip: Start with the fundamentals. Often the more challenging aspect is understanding the many techniques that SimCorp Dimension uses to deliver the STP workflow. Creating a heatmap of what parts are working well and what is a problem can create an overview of where to start building improvements.

Improving your STP rate may be the main goal, but another objective can be to improve the overall design to make it more supportable and efficient so that onboarding new instruments can be done in a more automated way. Achieving a high STP rate delivers high value to operations and ultimately all areas of support in a critical system like SimCorp Dimension.

Hopefully, this piece has covered some interesting points in regard to Straight Through Processing and how it can be better utilized. If you have any further questions or comments about this topic, do not hesitate to contact us.



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