Money managers are looking to improve trade processing in their ongoing effort to keep costs — and operational risks — down.
"The drivers today are more about stripping costs out through replacing people with electronics," said David Easthope, a securities and investments analyst at Boston-based Celent LLC, referring to the investment industry's efforts to adopt so-called straight-through processing, or STP.
"The other thing is lower (operational) risk on the trading desk," he added. "This is now a front office issue. The front office cares about trades that haven't settled."
Among the leading institutional investors pushing for STP is the $196.7 billion California Public Employees' Retirement System, Sacramento. The system's STP policy cites several reasons for moving to an automated trade routing, execution, settlement and reporting system. They include:
• achieving maximum operational efficiencies;
• eliminating redundant operations and systems;
• minimizing risk and reduce trading errors;
• reducing transaction processing costs; and
• cutting reliance on paper-based payment and documentation.