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This article was first published on bobsguide on 1st February, 2022.
Multi-asset class trading has evolved and transformed to be front-of-mind for capital markets firms. However, processing these trades in asset-based technology and operations silos is no longer an effective strategy for firms that want to optimise efficiency, mitigate risk, and capitalise on market opportunities. In Broadridge’s recent white paper, The case for a multi-asset post-trade approach, we collaborated with Firebrand Research, a capital markets research specialist, to help demonstrate why the industry needs to be more joined up across asset classes in order to improve performance.
In this article, we’ll delve into some of the key themes and lessons emerging from the white paper that show why and how firms are moving to an increasingly strategic and efficient post-trade environment through digital transformation.
The diversification of institutional investments into a broader range of asset types over the last couple of decades has been significant and transformative. Buy-side firms have increased their investment focuses from the more traditional end of the investment spectrum to all kinds of alternatives, including real assets such as commodities, real estate, and even crypto assets in some cases, in the search for yield. Based on a Firebrand research survey, conducted in the first half of 2021, most sell-side firms have siloed, asset-based technology and operations infrastructures to process the range of asset classes their clients and trading activities require. Interviewees indicate that, in the main, they do not yet have a single system to cover all of their post-trade asset classes equally; only 14% of respondent firms have a single system for processing all of their instruments, whereas the rest have silos by asset class and by geography.
Several interviewees also noted that their legacy systems are currently unable to scale to meet the requirements of the market, and significant pressure is on the operations team to move away from manual processes and silos to a more integrated system with a single, streamlined workflow and centralised set of records across all asset types. The buy-side demand for support across a broader range of asset classes, combined with changing market dynamics, has combined to place significant pressure on sell-side firms’ post-trade operations and IT teams.
Firms are increasingly seeking to transform their post-trade operations in response to risk and cost-pressures, in order to streamline their operations and technology and improve client service levels. The 2021 Broadridge Next Gen Technology Adoption Survey indicates that 67% of firms are currently focused on digital implementation, including digitalising workflows, improving the client experience and building out data intelligence analytics. So, what is the opportunity for firms undergoing digital transformation for multi-asset processing?
With the challenges inherent in sustained multi-asset growth, the need to re-evaluate the post-trade approach is clear. Within this new environment of evolving market dynamics, the continuation of the silo model has the potential to cause significant difficulties for firms. Below, we’ll discuss some of the internal and external pressures that sell-side firms are facing from a multi-asset support standpoint:
The diversification of institutional investments into a broader range of asset types over the last couple of decades has been transformative. Sell-side firms that adopt a unified, multi-asset solution on an agile, mutualised service basis, can gain transformative advantages and afford themselves enhanced business opportunities, more streamlined operations, and lower operating costs – and ultimately a stronger client proposition.
A business case for investment in a multi-asset class approach to post-trade can therefore be built using the following aspects:
In this article, we have outlined key elements that firms should keep in mind when underdoing a strategic multi-asset post-trade transformation programme. Firstly, firms need to be dividing projects into manageable phases and identifying initial problem areas that would benefit most from transformation. This process is much easier if a firm outlines achievable targets, both in the short-term, and long-term. Secondly, seek out the right partner that has the capabilities to invest in next generation technology with proven business expertise, to help future-proof your business. And finally, ensure that every step of the firm’s transformational progress is documented. Download the full white paper today to learn more about how firms are getting ahead and undergoing a transformation of their post-trade operations.
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