By | 2019-07-12T16:42:35-04:00 June 13, 2017|Data Management, Middle Office|

Trade processing can often be a manual and risk-fraught process that advisers take on themselves.  While at one time that decision may have been reasonable, today there are opportunities for advisers to outsource all that post trade execution processing to a third-party service provider.  This can potentially save money to be invested elsewhere, and just as importantly can reduce a firm’s risk for trade processing related errors.

Since many post trade execution processes at advisers tend to be manual, when things go wrong they can cause errors and cost the firm money.  For example, missing voluntary corporate action elections, chasing brokers on bad trade details, or dealing with settlement issues can all pile up and create a lot of exposure for an adviser.  Outsourcing these functions allows advisers to transfer this responsibility to a service provider who has technology along with experienced professionals to handle these functions before they result in real dollar costs to correct an error.

Benefits of Outsourcing

Using an outsourcer that has standardized processes and a robust technology platform can help eliminate errors and push responsibility and risk to that third party.  Advisers also gain increased efficiencies by having access to world class trade processing tools which might ordinarily be out of budget, allowing them to invest in core businesses or other revenue generating opportunities.  With a third-party service provider, advisers do not need to be concerned with hiring, training and maintaining a staff of professionals focused just on trade operations. Rather, these valuable staff members can help focus on revenue retention and generating activities.

By partnering with an experienced outsourced agent, advisers receive the comfort of knowing that a highly skilled team of experienced professionals are an extension of their investment operations team.  These dedicated individuals, at an experienced service provider, handle all your daily trade processing requirements.  A typical service provider arrangement covers adviser trades through the trade lifecycle, beginning with trade communication, through trade affirmation and down to settlement monitoring and fail reporting.  Daily fail reports can allow advisers to get in front of any trades that are failing so they can mitigate their exposure and reduce monetary impact.

Industry Leading Technology

Ultimus invests heavily in its trade processing systems, leveraging industry leading technology like SWIFT and Omgeo.  This technology facilitates automation and straight through processing, allowing advisers to have access to these systems without having to invest in training or incur the expense of licensing fees, development and maintenance costs. These tools are a key element that investment consultants will be looking for when ensuring advisers have robust trade processing operations.  By utilizing these systems, Ultimus can monitor each trade through the settlement life cycle ensuring that trades are transmitted to the custodians via SWIFT or other means required.  Trades also flow to the brokers through the Omgeo OASYS platform using OASYS Trade Match for automated matching of allocations to broker confirmations.  Omgeo’s NearMatch and TradeSuite tools are deployed for those trades that fail to match/affirm automatically.  All allocations are monitored to ensure confirms are issued and are affirmed by T+2 at 11:30 AM.  Having a middle office service provider, like Ultimus, facilitate trade operations on these trade processing systems allows you to feel confident that errors will be minimized and accuracy improved.

Timely & Successful Settlements

Omgeo’s ALERT houses all ‘Standing Settlement Instructions’, allowing brokers easy access to settlement data.  In addition, each of these products and services are provided and maintained by the middle office trade processing service partner.

The trade processing team works closely with investment managers, brokers and custodians to correct any trade discrepancies and to ensure timely settlement.  Trade fails are monitored, aged and reported daily.  Additionally, the middle office trade processing team works to remedy the failed trades to allow for successful settlement.

Monitored Corporate Actions

Corporate Action (Mandatory as well as Voluntary) notifications are monitored and shared. This ensures that investment managers are aware of all corporate action events, election options (for voluntary events), and the specific response deadlines.  Once election choices are determined, the middle office team follows up with custodians to ensure timely and accurate elections occur.  Outsourcing the corporate action monitoring function can shift the burden of risk from the adviser to the outsourcer.

Conclusion and Two Final Questions

Partnering with an outsourcer like Ultimus, a firm that has invested in the right technology and experienced professionals, can mitigate an adviser’s risk and provide confidence that corporate actions and trade processing functions will be handled timely and accurately. That leaves only two last questions. Could you benefit from outsourcing your middle office trade operations? If so, what are you waiting for?

If you are interested in exploring our services please contact Gary Tenkman or Mike Ciotola and we would be happy to discuss in more detail.

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