P&L Report Card: Given the focus on
probably the one area as
busy – probably busier –
than the technology
development teams, is the
back office. Post-trade is
where the box ticking is
done, the checks and
balances exist here.
We have noted in previous years how we view the end game in
post-trade as being based very much around a utility model – the
stricter the rules get, the less room there is for manoeuvre and
That time is not yet upon us, and the industry has also
faced increased demand for analytics, especially TCA.
Although we see the utility model dominating, this does not mean
a bank can maintain a strong relationship with clients without a
strong post-trade function. If nothing else, the clients are looking
for products and services to help them remain compliant, as well
as help them process the necessary virtual paperwork.
Given the focus on costs, the post-trade function is ground zero in
terms of efficiency gains – and this can put a strain on the business,
which only serves to accentuate the importance of good technology.
So those banks with good prime brokerage businesses (Citi,
Deutsche Bank, JP Morgan, UBS especially) have a head start in
this space because, quite naturally, they are very efficient and
process driven. Throw in a good analytics package that allows
clients to understand their business better – and tick those very
important best execution boxes and you have a contender.
It is equally important to remember other services, however, especially
regulatory reporting. The last year has seen several banks roll out their
EMIR (European Market Infrastructure Regulation) reporting tools; this
drive was led by BNP Paribas launching its app for this in 2015.
Generally speaking, the work done on the post-trade function has
– yet again – been behind the scenes, but we want to make special
note of BNP Paribas, which, in the last year, added valuation,
confirmation and netting apps to Centric. It also, in what was a busy
development year for the bank, rolled out a transaction matching
app for asset managers, which has proved very popular.
One final development of note at BNP is the MiFID II compliance
app. Given the focus on this impending regulation, and the amount
of work several banks are putting in to be ready for January 1, 2018,
the release of this app – that enables clients to ensure and report
their compliance with the regulation – highlights the excellent, client
facing work, BNP has been doing.
Winner – UBS
Unfortunately for BNP Paribas, which is, as we note, excellent in
this space, there remains a giant – one that has spent a decade
or more developing and honing its services to clients to the extent
that it is the complete package.
We should probably make a gold plated trophy for UBS, for this is
the 10th year in a row the bank has won our post-trade award. And
if you’re wondering who won it before then? Nobody, because it
This ongoing excellence is the result of UBS’s focus, from the start
of the e-commerce boom around the turn of the century, to focus as
much on the processing as it has on the execution. The bank
pioneered the basic premise of the e-channel – making the standard,
day-to-day processing actions as automated and efficient as possible.
So UBS remains the standard for post-trade by which all other banks
are measured. For where others have historically focused on key client
groups, the bank has delivered its post-trade tools across all client
segments thanks to the generic, but scalable, fashion in which it built
them. This has given UBS a lead that it shows little sign of giving up.
The bank has dedicated huge resources – both technological and
human – to delivering client service across the entire post-trade
spectrum, as well as reporting and analytical tools and it does this
on a cross-asset class basis.
Furthermore, UBS has long had a good
understanding of what is required to process in an exception-based
fashion, but it continues to take the concept one stage further by
seeking to pre-empt potential problems. Any potential issues are
flagged early, meaning a solution can also be achieved earlier.
Over the past year, the bank has extended its use of robotics
technology to its post-trade business and, whereas last year it targeted
the very basic, but very time consuming process of confirmation
matching, this year it has focused on the netting and settlement space.
This has seen the bank severely eat into what it estimates are the 100
man hours a day it takes to match the hundreds of bilateral
settlements that take place outside of CLS every day.
This has seen UBS use robotics to send netting emails at pre-agreed
times of the day with these counterparties, thus making it easier for
the counterparty – who may not have the technology stack available
to UBS – much quicker in finding and agreeing the net settlement.
The post-trade space is a busy one, and as we noted last year with
the confirmation matching service, this simple and basic enhancement
frees up a tremendous amount of man hours for other tasks.
UBS’s post-trade experience emanates from its Risk Cockpit,
which is an operations workbench. In the Risk Cockpit, the bank
monitors everything about the bank-client relationship using a range
of static and interactive tools. More importantly, rather than just use
this information for itself to check how its systems are standing up,
the bank provides this data to the client, thus taking transparency
a stage further in the process.
This is backed up by a control room function, which monitors the
robots to ensure all is running smoothly – again this is an excellent
example of true exception-based processing.
The bank also has an FX MIS dashboard, which makes excellent
use of graphics to ensure the client has a quick and easy view of the
status of their trades – this is something that was seriously
enhanced by the launch of Neo. The dashboard enables clients to
see the overall STP rate, how many times a trade was “touched” and,
interestingly, any breaches of the Service Level Agreement (SLA).
The STP throttle continues to be an effective post-trade
management tool, as market activity more than ever is now
concentrated into bursts. By helping to ensure a stable, robust posttrade
platform, UBS is easing at least some of the operational risk
associated with such events.
Clients are able to access reports about their STP performance
versus a Peer Group, something that will enable them to easily
identify areas in need of investment or improvement (or both).
UBS’s prime brokerage service has always been one of the market
leaders from the very early days of e-commerce, and the past two
years has seen it develop and roll out superb analytics packages.
This means that in the box ticking world, UBS ticks all the boxes.
The pace of development is inevitably slowing, but we still believe
there is no better way to deliver client services than constant
improvement. UBS’s clients clearly think the same, for they continue
to advocate for what remains the “varsity” of post-trade provision.