Why Advanced Settlement is a key route to core revenue growth
Valerio Roncone, Head of Markets and Clients, SIX Securities Services
Financial institutions are increasingly faced with mounting pressures. The key burden is usually to reduce margins, against a landscape where rising costs of compliance are the norm, and the requirement for careful risk management is paramount. In order to survive and thrive in this environment, financial institutions must be consistently reviewing their business strategies in order to reallocate resources to focus on core growth and revenue.
Settlement is one of the areas with the greatest potential to be evaluated in this regard. It’s ripe for revolution with specialised technology that can save valuable operations resources, while also reducing risk.
Opportunities for reconsideration
Previously, Standard Settlement Instructions (SSIs) were collected and managed in a decentralised way by each bank separately. An SSI is a key reference data component in the trade life cycle that includes important information such as account names and numbers, security type and even the place of settlement. All of this information is a necessary component for a trade to settle, so serves a very important function. As a result, there is huge value to be gained through optimising the way that
SSIs are collected and managed. This one specific area presents notable opportunity for increased operational efficiency, though the settlement life cycle more broadly presents further opportunity to maximise profitability.
Proving the value of change
We recognised this potential for change within the settlement space with the launch of our Advanced Settlement offering. This range of post-trade solutions allows us to take over the settlement workflow from beginning to end so that we can maximise efficiency and profitability for the bank, all the while reducing cost and risk.
Our client, Vontobel, was the first customer to take these solutions on board, allowing us to launch the first phase of our offering. We worked together for two years in which time we were able to build a completely new settlement platform that is completely separate to, but compatible with, its conventional system. As of May 2017, Vontobel has been using the newly developed, fully integrated service to process settlement instructions directly from the trading system via a single interface – all completely automated and in real-time. Not only has this boosted efficiency and minimised risk, it has also maintained a high straight-through processing (STP) rate.
Understanding that SSIs could also be improved, these are now comprehensively and automatically generated by SIX Securities Services, and managed via a central database. This is a vast improvement when compared to the decentralised and disjointed process that was relied upon previously.
Advancing as the industry evolves
The financial space is evolving quickly when it comes to regulatory change and adoption. In order to keep up with the pace of this change, financial institutions must continue to challenge the status quo and regularly look at how processes and activities could be streamlined.
At SIX Securities Services, we are proud to be at the forefront of innovation such as this, striving to offer new and improved solutions to our clients and the markets. Services such as Advanced Settlement allow organisations to invest their time in core business growth, giving them the resource to focus on the strategic high value, high return services that will allow them to create a sustainable future. Vontobel is a shining example of this working in practice, and if its industry peers take this approach, they too will be able to become agile organisations fit for the future.