New York, NY – November 7, 2023 – In preparation for the imminent shift to a T+1 settlement cycle, the capital markets are urgently seeking enhanced technological and automated solutions. A recent research report from Coalition Greenwich, titled “Data Automation: The Workflow Efficiency Game-Changer,” underscores the critical necessity for technological advancements and automation within the capital markets sector. The study, which engaged more than 60 C-suite and senior leaders from capital markets firms in North America, the U.K., and Europe, brings to light the intricate challenges associated with implementing process automation in response to the substantial volume of data that requires processing.
Audrey Blater, Senior Analyst for Coalition Greenwich Market Structure & Technology and author of the report, emphasizes the importance of improving efficiency and accuracy across the trade lifecycle. She states, “Efficiency enhancements and enhanced accuracy are essential for firms to curtail costs, reduce resource demands, and mitigate risks. Many financial institutions have endeavored to address this by combining proprietary systems, internal resources, third-party providers, and manual processes, but results have been mixed. In order to adapt to market dynamics, evolving regulations, and ever-expanding data requirements, the adoption of robust and scalable technology for data automation and processing is absolutely imperative.”
The report underscores the dilemmas encountered by financial institutions in their quest for effective solutions. While 60% of the market currently deploys at least one third-party system, the utilization of both third-party and proprietary systems often results in substantial inefficiencies, necessitating additional human resources for reconciliation.
Key findings from the report include:
- The prevalence of offline reconciliation is highest among users of proprietary solutions, with these systems also exhibiting high rates of manual data cleansing.
- Third-party solutions are lauded for their capacity to standardize data, offering users the benefit of workflow efficiency. Nearly 80% of firms using third-party data cleansing solutions rely on these services for all of their data transformation.
- Notably, more than half of the study’s respondents refrain from outsourcing data cleansing, opting to employ proprietary systems and internal staff, which can be labor-intensive, particularly for data associated with emerging products like digital assets.
- Approximately 36% of respondents employ manual processes to cleanse 10% or less of their data, while nearly a third still rely on manual processes for data cleansing in over 50% of cases.
As the 2024 T+1 implementation deadline swiftly approaches, concerns mount regarding the readiness of market participants, particularly smaller institutions. The mounting complexities of data management, reliance on legacy technology, and the use of multiple systems may lead to a race against time to meet the impending deadline.
Josh Monroe, Chief Revenue Officer at Xceptor, underscores the urgency of the situation, stating, “The industry’s ongoing struggle to effectively manage and process the ever-increasing volumes of intricate and unstructured data is cause for concern. This limitation hinders firms’ ability to automate and streamline their processes efficiently, especially when relying on in-house solutions. The imperative of the moment is to achieve more with less.”
In conclusion, as the financial industry braces for the transition to T+1 settlement, the imperative of intelligent data automation becomes increasingly evident. Firms that embrace scalable, efficient technology solutions are better positioned to navigate the evolving landscape of capital markets and meet the challenges presented by reduced settlement times.