VIDEO | The push for optimisation in post-trade processes is reshaping the financial landscape as firms face regulatory changes, market volatility, and rising capital requirements. At PostTrade 360° Nordic 2024, industry experts gathered to explore these pressures and discuss comprehensive solutions in areas from collateral management to risk analysis. With new regulations such as the Basel endgame rules on the horizon, the industry is focused on managing costs and improving operational efficiency. “Capital is probably the number one focus at the moment,” said Erik Petri, head of Optimisation at OSTTRA, as he explained the impact of these regulations on firms’ daily operations.
The meaning of optimisation varies widely, even within the same firm. Petri noted, “Optimisation means different things to different people,” adding that it can operate on a trade-by-trade basis or across entire portfolios. “You need to have the more industrialised vendor solutions that chop down the tallest trees,” Petri said, while acknowledging that individual banks face unique challenges requiring tailored approaches. Neil Murphy, director of Trade Lifecycle at OSTTRA, pointed out that the front office “wants control of the optimisation. They don’t want a black box that provides some results they have no control of.”
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Real-time integration challenges
Data quality and accessibility remain key obstacles in optimisation, particularly for smaller firms. As Murphy highlighted, collateral optimisation “requires information on exposures, inventory, market data around prices, and repo rates” as well as accurate, real-time access to data. He observed that data on internal funding costs, for example, is not “an off-the-shelf number” and often isn’t connected to broader systems, making integration difficult. Effective optimisation also requires coordination between departments, he noted, as “ownership of the optimisation is in the front office, but the processing of the results is done by the back office.”
External vs. in-house optimisation
As financial institutions seek to optimise, many turn to external providers for efficient, ready-made solutions. Murphy observed that while in-house solutions were once the standard, today’s market has seen a shift toward external providers. “When I started my career in banking, everybody wanted to do their stuff in-house,” he said. But he acknowledged the efficiency of standardised external solutions, which can save time, cost, and resources: “Plug-and-play gives you 80–90% of what you want.” For many small to mid-sized firms, this standardised approach is more practical than costly in-house development.
In a complex post-trade environment, vendor solutions must cater to a wide range of objectives. “You may have one view, and another client may have a different view,” Petri remarked, explaining that vendors need to manage these varying goals. The role of vendors, he said, is to deliver solutions that allow “both wishes to come true at the same time,” creating what Joshua Hurley, director Post Trade Consulting at Davies, jokingly called “dream makers.”
Incremental improvements
The panelists acknowledged that optimisation often requires balancing incremental improvements with periodic, transformational change. “Incremental improvements” in areas like collateral selection are ongoing, but Petri noted that major shifts are usually driven by external pressures, such as regulatory demands or market events. Murphy added that “optimisation isn’t something you just do tomorrow—it’s a complex process,” and firms should focus on connecting incremental improvements across the trade lifecycle for optimal results.
As firms continue to face regulatory demands and operational challenges, leveraging both incremental improvements and vendor-led solutions will be essential to creating resilient, efficient post-trade processes.
Panelists:
Joshua Hurley, director – Post Trade Consulting, Davies
Erik Petri, head of Optimisation, OSTTRA
Neil Murphy, director – Trade Lifecycle, OSTTRA
• The consolidated PostTrade 360° Nordic conference, in Stockholm on 4–5 September 2024, came to host 1,200+ delegates and featured 70 sessions.
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