Taylor Bodman, a partner at Brown Brothers Harriman with responsibility for the custodian’s Infomediary service, had some advice for firms thinking about how they should approach STP projects.
Build it fast, he said, it will start generating returns and reducing risks immediately, so don’t waste a lot of time planning. Instead of detailed plans he urged an approach of Ready, Fire, Aim.
“Projects inevitably cost more than expected and the biggest reason is time.” One client was pushing BBH for speed, and Bodman had to say, “We can do it faster, but it is going to cost you a lot less. That’s our real experience with these projects.”
Too many firms decide that they can’t get to 100 percent STP until everyone is operating electronically. But a few laggards don’t matter.
“The target with STP is so big that 40 percent is a great number.” Firms should take advantage of the fast feedback loops to spot exceptions to straight-through processing and correct them. And perhaps it doesn’t make sense to try for 100 percent STP, he added. With a PowerPoint to make his case, he showed a chart that indicated ROI is significant in several steps. But getting from 80 percent STP to 90 percent can be expensive and it might make more sense to stay at 80 and do the rest manually.
The dark side, added Bodman, is when STP becomes the driving force for the business model; then it can obscure the customer voice.
Corporate Actions
Look for a lot of focus on corporate actions – splits, dividends, warrants – at Sibos this year. The industry is slowly moving toward more standardization of information that isn’t always very standard.
“Voluntary corporate actions are dreamt up by investment bankers with no interest in corporate standards,” said Bodman of BBH.
SWIFT is processing more than 4 million corporate action messages a month, according to Linda J. Bookheim, senior business manager, partner solutions at SWIFT, and the number is rising steadily; volumes are up 21 percent over a year ago. They are coming from over 100 financial services firms, largely in Central Europe, the Middle East and the Indian subcontinent.
She is pleased that the narrative message volume is not growing as quickly, indicating that firms are learning to employ SWIFT standards for notification, instruction, confirmation, and status. The message standards were developed by industry practitioners, which is a key reason they are being widely used, she adds.
Still, just because SWIFT is involved doesn’t mean the process is entirely standardized.
Don Forecki, director of investment operations at Northwestern Mutual Life in Milwaukee, gets his corporate notifications over SWIFT from several custodian banks, but he has noticed that the options are often listed in different order for the same corporate action from different banks.
Welcome, Regulators
At ISITC in Boston this spring, Nigel Solkhon, who has responsibility for financial industry solutions in EMEA for IBM, said the financial services industry lacks vital leadership at the top.
“The regulators are coming in because of a void of leadership. The industry is being run by the stick rather than the carrot. There is no forum for the senior people to talk. There is a CEO forum for the asset management industry to feed into the EC. G30 in the late 80s had a big problem around equities but with the last G30 report, no one took any notice. It was insight, but with no plan for execution. Senior executives need a forum.”