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Survey Finds More Interest in Automating Post-Trade

A new survey of senior operations staff at investment firms involved in OTC derivatives trading finds increased interest in automating post-trade OTC derivatives processing.

The survey, conducted at an OpenLink sponsored webinar, looked at the relative importance of risk management concerns faced by professionals in the growing electronic environment.

A majority of respondents indicated they plan to automate post-trade OTC derivatives processes, with nearly 70% answering that they will do so in 2010. This automation includes affirmation, confirmation or collateral management.

“As OTC derivatives markets grow rapidly, it is clear that organisations are transforming their settlement operations through automation, and that organisations are at different states in this process. These initiatives become change management exercises via solutions which ultimately lead to better workflow efficiencies and controls,” says Ken Knowles, executive vice president, financial and risk solutions at OpenLink.

“We conducted this survey in part to better understand how to translate the market’s challenges into solutions which enable them to innovate and succeed in this rapidly changing landscape.”

The survey also reveals that respondents varied widely in their utilisation of electronic OTC affirm/confirm processing.Around 28% of respondents stated that most (more than 75%) of their affirmation, confirmation or collateral management processing is conducted electronically. About one quarter stated that electronic processing comprised 50-75% of that activity, 23% conductedthese activities electronically 25-49% of the time with the remainder of respondents at under 25%.

When asked what areas of OTC respondents are most interested in learning about, the top three results were: 31% want to learn about operational efficiency; 21% are interested in risk management; and 17% are interested in counterparty risk management.

Finally, participants were asked to rank the level of counterparty review across asset classes achieved by their organisations as “high”, “medium” or “low”. While a little more than half selected the level at their firms as medium, a little over a third noted that they have observed a high level of review. Only 11% stated that the level of review was low.

“The need for transparency underlies all of these statistics,” says Fritz McCormick, senior analyst with Aite Group. “Gaps remain in affirmation/confirmation processes and counterparty review. Automating these areas, among others, will boost transparency, crucial for risk management, regulatory mandates and operational efficiency.”

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