In June 2020, the Bank of England (BoE) created a Post-Trade Technology Market Practitioner panel to look at the future of post-trade systems and processes. The subsequent report posited that post-trade processing across the industry is too reliant on manual and outdated technological processes. Decades of under-investment in the middle and back office has meant that large-scale overhauls of post-trade platforms have been few and far between. Consequently, post-trade operations involve the most amount of manual processing of any part of the trade lifecycle. Without modernisation of post-trade technology and processes, the elusive aim of straight-through processing (STP) is unachievable. This article examines the challenges and possible solutions to the ‘post trade problem’ and what might be done to accelerate the move towards full automation of the trade lifecycle.
Post-trade is an umbrella term to define all events and activities that take place in the lifecycle of a trade after the point of execution. Colloquially, the term is used to describe only processes undertaken by Operations teams, such as confirmation, clearing, settlement, collateral allocations, margin calculations and corporate actions, but it can also be extended to include other downstream processes, such as regulatory and management reporting and processes performed by Finance and Risk departments. While they are sometimes viewed as taking place at the mundane end of the trade lifecycle, post-trade services are an indispensable part of the end-to-end transaction and value chain – enabling the discharge of obligations entered into at trading level, and the processing of corporate actions initiated by issuers for the benefit of investors.