Outsourcing Post-Trade Operations to Improve Scalability and Operational Efficiency

Creating, maintaining, and managing the IT infrastructure related to post-trade processing can be both expensive and labor-intensive for hedge fund and investment managers. The complexity of the regulatory environment also has a profound impact. As regulatory requirements evolve, technology must evolve in kind, and for the buy-side firms, that means leveling up their matching systems.

Recent insights from Celent “from pre- to post-trade: scalable structure, data validation, and efficient reporting” examine the trend of hybrid outsourcing services to improve economics and scalability. Before the emergence of the full-cloud world in capital markets, a new form of ‘hybrid’ is needed in the transition phase. The global marketplace is now turning to hybrid outsourcing and managed service combinations to achieve economics and scalability.

FIX: A Key Driver of Success Across the Trade Lifecycle

An evolution of the post-trade landscape means that technology must evolve in kind. When settlement occurs on T+1, it compresses the timeline for rectifying trade breaks. This dynamic is especially pronounced for entities that are active in the market globally.

The FIX protocol is the key to achieving a rapid settlement cycle. FIX-based matching is a natural extension of the buy-side trading platform, using the same bilateral communication method as the front-office. That means orders contain the same instructions and unique identifiers, which can be exchanged in real-time, from origination to settlement, enabling true straight-through processing.

Through an innovative FIX-based approach, Broadridge’s NYFIX Matching delivers tools that work hand-in-hand with the post-trade process itself, enabling a seamless trade lifecycle that can occur as fast as T+0.

A Hybrid Outsourcing Approach

An example of a firm benefiting from this hybrid approach of post-trade matching to NYFIX Matching, is one of our buy-side clients based in Hong Kong, that maintains a high level of work quality from the operations team as a result. Focusing on the global technology sector, this Asia-based hedge fund has increased its AUM exponentially over the past 5 years.

With the need to maintain the same high level of work quality while achieving greater operational efficiency, the firm’s COO decided to partially outsource the repetitive and laborious work of post-trade allocation and confirmation to NYFIX Matching.

Delivered as a fully managed and cloud-based solution, NYFIX Matching enabled the firm to take a hybrid approach, in which Broadridge performs its post-trade allocations and works seamlessly alongside its middle-office and back-office systems. More importantly, this hybrid outsourcing strategy allows the firm to adopt the latest technology to support its future growth.

NYFIX has recently been named the Best Trading Network at WatersTechnology Asia Awards.