Technology – driver of tomorrow’s post-trade world?

Technology – driver of tomorrow’s post-trade world?

Post-trade service providers, driven by the growing importance of technology and evolving investor needs, are undertaking major reviews and upgrades of their system and operations environments. One of the primary aspects defining these drivers is that market participants continue to suffer from high operational costs, meaning they are searching for alternatives.

The list of new technologies with major transformation capabilities is long: Distributed Ledger Technology (DLT), cryptocurrencies, Robotic Process Automation (RPA), Artificial Intelligence (AI), Application Programming Interfaces (APIs).

DLT is by far regarded as the most promising technology as it offers decentralization and, potentially, a different approach to interoperability for market participants. After the initial hype around DLT that began in 2015 died down, SIX Securities Services saw an increasing number of collaborative innovation projects working to move Blockchain out from a proof-of-concept into production systems.

We continue to explore the opportunities arising from DLT in various areas. Amongst other initiatives, we have built an online platform for corporate actions – xChain – that allows market participants to work on a consolidated set of data that is cloud-based and in real time. This eliminates redundancies that currently exist in the way that corporate actions are processed.

Valerio Roncone, Head Markets & Clients and Member of the Management Committee, SIX Securities Services

SIX Securities Services’ DLT strategy is simple: find the right use cases and start in a semi-isolated environment to examine and facilitate real-world adoption. But even if DLT-based implementations are successful, challenges surrounding operational, business and regulatory issues will continue to arise in the securities markets and will remain unanswered for years to come.

First: solve challenges over the lifecycle of a trade

As a consequence, instead of talking about new, disruptive technologies, the post-trade industry should first focus on the challenges that need to be solved over the lifecycle of a trade. Technology alone does not bring any added value without the right underlying business model and structures.

The aim of any effective post-trade service provider should be to develop the right capabilities to solve real problems and create value and coherency across the entire market, for example by seamlessly managing and communicating information, by optimizing workflows that facilitate operational productivity or by leveraging relationships in order to provide investors with a truly end-to-end process.

Valerio Roncone, Head Markets & Clients and Member of the Management Committee, SIX Securities Services

Market participants need to look beyond traditional structures and facilitate a model that addresses what is needed going forward. It is essential that different post-trade service providers work together and focus on investor needs while finding creative, streamlined, scalable solutions that can be leveraged across business lines. SIX Securities Services follows this objective by developing a package of value-creating solutions which help financial institutions to significantly offload their operational setup and reduce operational risks and costs. As an example, it has restructured and automated the entire settlement end-to-end process starting after trade execution and including the entire generation of settlement instructions to the full settlement completion on behalf of financial institutions. The service called Advanced Settlement also takes over the entire management and maintenance of standing settlement instruction.