P&L Report Card
Well we’ve mentioned MiFID II enough in this feature so it’s time to focus on the area that bore a lot of the reporting brunt, for post-trade is very much about the box ticking, the checks and balances that permeate the regulation.
We continue to see a drift towards a more utilitarian approach in post-trade – as we noted last year, the more focused the rules get, the less room for manoeuvre there is, therefore collaboration is probably the way forward.
Luckily an increasing number of banks are looking at the shared, open source world in a kinder light than they did maybe two years ago, so if this trend does develop then it will probably start in the post-trade world.
Although we see the utility model dominating, this does not mean a bank cannot 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. The banks have realised this because, as we have already noted, so many are talking about integration into the clients’ workflow, and much (certainly not all, however) of this takes place post-trade.
The focus on costs means the post-trade function remains 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.
Inevitably the good prime brokers are strong in this field – it is interesting to note how many pieces of functionality that started in Click, it’s PB solution, now figure in Citi’s Velocity. This is also the case with Deutsche Bank, JP Morgan and, our perennial winner UBS.
BNP Paribas has done well over the past three years in rolling out regulatory reporting tools and other processes that help the client navigate the often tricky waters of local regulations and the app model means new products are easily added to an already impressive solution. The bank rolled out a MiFID-dedicated app last year, it is probably too optimistic to hope that it will be retiring it soon!
Winner – UBS
Last year we mentioned that as it was the 10th year in a row that UBS had won the Post-Trade Award, we should consider giving them a gold-plated trophy – which we duly did. The bank is already on its way to the next level, which we assume will be platinum.
It is of no surprise to us that the bank continues to push ahead in this space because not only has it established an enormous lead over its peers, it shows no signs of sitting on its laurels.
The keys to UBS’s post-trade excellence are its efforts to nip issues in the bud – we have mentioned before how the bank has shifted to an exception-based processing model, most have, but few dedicate the resources to spotting potential issues and producing solutions (often before the client even notices it has an issue) that UBS does.
The past two years has seen UBS develop and grow its use of robotics in its post-trade business, this started with confirmation matching and then moved into the netting and settlement space.
Last year it again extended its use of the technology to cover the monitoring of its performance, this has allowed it to build in even more throughput capacity, as well as CLS settlement processes.
It has also studied and developed improvements to its processes to reduce manual touch points further, thus delivering better efficiencies for the downstream client. A good example of this is how the bank has automated so many processes around SSI (standard settlement instructions) which have historically been quite labour intensive.
The bank has also started monitoring its communications in that it measures how many times clients are emailed about an issue or with content, and how many actually read the communications. Through this analysis it is able also, to cut a good proportion of its own communications that merely double up on a task undertaken elsewhere, such as broker confirmations.
The managed service construct of UBS’ post-trade business means it is able to achieve considerable savings in what remains a costly, but vital, business. Part of this has seen the bank partner on services for which it pays by “touch” rather than by subscription, thus the more efficient and accurate its processing, the less it pays.
UBS’s Risk Cockpit, its operations workbench, continues to provide the client with transparency over how their business is being handled thanks to reports delivered by schedule or on a bespoke basis, and the FX MIS dashboard also allows a client to easily, thanks to the excellent use of graphics, see the status of their trades, their STP rate and where the manual touch points are.
The post-trade function is rarely in the limelight and for most that is a good thing because it shows that nothing is going wrong. An efficient post-trade business, however, where there is something approaching an obsession with trimming costs and building even the smallest efficiency in, is a considerable benefit to the front office trading business, which after all, pays for it.
We accept that post-trade often remains in the shadows, but UBS’s operations teams are so good, the bank so focused on delivery the smoothest possible journey for a trade, that we feel someone has to shout it from the rooftops. Thankfully we can, in a virtual fashion, because true excellence exists in the foreign exchange market – and it is in UBS’s post-trade business.