As certain countries around the world emerge from lockdowns, what lessons have been learned from the COVID-19 pandemic about the need to simplify FX post-trade workflows, and how can cloud-based technology improve post-trade efficiency?
- Financial institutions have historically prioritised investment in front-office systems. However, evolving regulations have emphasised the importance of a resilient FX post-trade infrastructure.
- During the COVID-19 pandemic the limits and complexity of legacy systems led firms to reconsider their post-trade technology requirements.
- Adoption of cloud-based technology such as Refinitiv Deal Tracker as a Service (DTaaS) is becoming more widespread as firms recognise the cost and efficiency advantages of outsourcing.
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Firms have traditionally been reluctant to make changes to their post-trade operational infrastructure, despite the complexity that exists as a result of increased liquidity fragmentation.
This fragmentation shows no sign of abating, with the launch of new trading venues, an increasing number of aggregation services to provide access to liquidity providers, and new innovative technology to offer more execution choices.
All of these factors have contributed to complex post-trade systems and dependency on multiple applications. This in turn has raised costs and led to increased operational risk, which is an issue for the regulators and for the firms themselves.
Time to review FX post-trade workflows
During the COVID-19 pandemic, financial institutions faced a number of challenges with regard to FX operations. With the majority of teams working remotely, the focus was on working longer hours to shore up existing post-trade infrastructures, to ensure that the record number of tickets could be accommodated and that the trade lifecycle was able to continue without interruption.
Looking back at 2020, firms now acknowledge the need to create an agile, resilient post-trade infrastructure that will better serve them in times of uncertainty and extreme market volatility.
With the FX market subject to more regulatory scrutiny than ever, the industry recognises the importance of straight-through processing (STP) workflows, reporting, audit trails and the growing need for a standard messaging protocol such as the FIX protocol.
This includes the need to automate FX post-trade workflows and reduce reliance on the many manual processes that, in the eyes of the regulators, represent increased operational risk.
Cloud-based platforms have long been recognised to provide advantages in terms of flexibility and cost-effectiveness, but are now also acknowledged to provide the robust security and stability required by the industry.
The Cloud is gaining in popularity as firms increasingly recognise how outsourcing technology can improve operational efficiency and save costs. Workflow can be improved by driving out deployed middleware, thereby reducing the possibility of single points of failure.
How can Refinitiv help?
Refinitiv Deal Tracker is a suite of tools for monitoring and processing FX trades on all major FX platforms.
Supporting FX spot, options, swaps, forwards and NDFs, Deal Tracker includes Refinitiv Trade Notification (RTN) that greatly improves transparency by capturing data across Refinitiv and other FX liquidity venues.
Deal Tracker as a Service (DTaaS) stores data on infrastructure hosted privately by Refinitiv, rather than be deployed at the customer site, and uses FIX protocol-based STP to increase efficiency.
Deal Tracker enables effective collaboration between front-office risk control, middle-office trading room support and back-office treasury operations.
The service can be integrated with Refinitiv’s recently-launched FX Aggregator, providing a holistic view of all aggregated orders and pre-trade quotes linked to trade executions, as well as providing the capability for trade reconstruction and trade reconciliation workflow.
As part of its ongoing commitment to the enhancement and development of post-trade technology solutions, Refinitiv recently announced an agreement with Capitolis to enable access to Capitolis’ suite of products through RTN.
Similar collaborations are likely in the future as Refinitiv continues to focus on STP with a view to promoting a transparent and efficient global FX ecosystem.