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WHY ADVANCED SETTLEMENT COULD BE THE HOLY GRAIL FOR REVENUE AND GROWTH

Valerio Roncone, Head of Markets and Clients, SIX Securities Services

It is no secret that financial institutions are under an increasing amount of pressure to reduce margins, all the while being faced with the rising costs of compliance, and need for careful risk management.  Against this backdrop, it is vital that financial institutions review their existing business strategies with a view to freeing up resources to focus on core growth and revenue. If organisations are to thrive in today’s competitive landscape, they will need a laser focus on their competitive differentiators, and initiatives that add tangible value to the bottom line.

Settlement is an area that is ripe for revolution through specialised technology, saving valuable operations resources as well as reducing risk.

Identifying opportunity for reconsideration

In the past, Standard Settlement Instructions (SSIs) were collected and managed in a decentralised way by each bank individually. These are a key reference data component in the trade lifecycle including important information such as the place of settlement, account name and number, security type, etc. Essentially, it encompasses all of the information that is required for a trade to settle, so it has an extremely important function. Given their importance in the post-trade lifecycle, the process of collecting and managing SSIs must be optimised.

As well as drilling down into the more specific elements of the settlement lifecycle, there is also potential to review the process as a whole to maximize efficiency and profitability.

Putting it in to practice

In recognition of the potential to significantly optimise this area, we launched ourAdvanced Settlement offering. This range of post-trade solutions allows us to take over the entire settlement work-flow to maximise efficiency and profitability for the bank, while reducing cost and risk.

Working with our client, Vontobel, we were able to launch the first part of this service. Over a period of two years, we were able to build an entirely new settlement platform that is completely separate to, but compatible with, its conventional settlement system. Since May, it has been using this newly developed, fully integrated service to process its settlement instructions directly from the trading system – on a fully automated, STP and real-time basis – via a single interface. As well as boosting efficiency and minimising the risk of its entire settlement process, it also maintains a high straight-through processing (STP) rate.

It was clear to us that SSIs could also be improved – from now onwards, they will be comprehensively and automatically generated by SIX Securities Services, and managed via a central database. This is a significant advancement compared to the decentralised and disjointed process that has been relied upon previously.

Innovating in a time of industry change

As the landscape continues to change, and organisations grapple with quickly evolving regulatory pressures, it’s vital that those involved in the ecosystem never stop challenging the status quo to look at how things might be done differently.

We are extremely proud to be at the forefront of such innovation, constantly seeking to offer new and improved solutions to our clients and the market. Services such as these allow organisations to focus their efforts on their core business, giving them the ‘corporate bandwidth’ to focus on the strategic high-value, high return, services that will enable them to build a sustainable future. Vontobel is a clear example of this working in practice. If their peers are to follow suit, this must be the route they take, with experienced, agile and trusted partners to support and drive this forward-thinking mentality.