Toward Best Settlement: Improving Post-Trade Efficiency
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(1)Overview: While much has been made of the fragmentation of liquidity and trade execution venues, little has been said about the fragmentation of the post-trade environment -— a large and overlooked opportunity for efficiency improvement. With trading technology evolving to address execution challenges, it is time to look at the entire trade lifecycle with the goal of increasing efficiency and reducing operational risk in trade settlement. This document discusses the issue, identifies opportunities for improvement and outlines some of the technology tools available to streamline the trading lifecycle from portfolio construction through settlement. Thinking Beyond Execution: The fragmentation of the trading environment has been one of the investment industry’s hottest topics of the past decade. Spurred by unprecedented levels of assets pouring into market and technology that compressed the cycle from idea to execution, myriad trading venues have sprung up, from new electronic exchanges to “non-displayed liquidity” sources better known as dark pools. A great deal of effort and energy has been expended on developing techniques and technology solutions to help traders cope with this more complex environment. The focus has been on managing ever-increasing trade volume and alternative destinations efficiently while meeting best execution commitments. In its emphasis on execution, however, the industry has largely overlooked the issue of fragmentation in the post-trade environment—how to streamline the many steps that must be carried out between execution and settlement. Custodial and broker notification... Read more...
