The Reality of STP: No Stopping, No Waiting
From Boardroom Minutes
A London-based investment bank reaps the rewards of a
straight-through processing initiative broken into manageable steps.
In a bear market, there's only one route to expansion for equity
brokerage businesses: Make processes more cost-efficient.
With an eye to increasing its share of the Japanese market, Tokyo
Mitsubishi International (TMI), the investment banking arm of Bank
of Tokyo Mitsubishi, has come to view technology as a key
competitive weapon.
"For now, the only way to get new business is to take it from other
people," says Don Simpson, managing director of operations and
technology at TMI. "And to do that, you have to be able to do
business faster, better, and cheaper than anyone else."
Volume Going Up
Japan's deregulatory Big Bang in the late 1990s created
opportunities for London-based TMI to expand its business. But the
bank quickly found that its existing back-office system was
stretched to the limit. "We found we would not be able to handle
increased volumes or achieve the turnaround times our clients
required," Simpson says. Accordingly, TMI upgraded its server
platform (see more) and set in motion
a series of straight-through processing (STP) initiatives, reaping
the rewards progressively along the way.
The most dramatic advances have come from the introduction of a new
settlement system to handle the firm's Japanese and international
equity business. Since the system went live last year, TMI has moved
from an STP rate of zero to 95 percent for cash equities and reduced
processing costs substantially.
TMI's straight-through processing gains are a result of an alliance
with the British independent software vendor
Coexis, whose Java technology-based Syn~
solution replaced TMI's Gloss Equity settlements system.
At the heart of Syn~ is an engine that allows banks to handle
everyday processes ranging from how they send confirmations and
SWIFT instructions to calculating the interest on a specific deal.
On top of that, Coexis provides a series of banking solution
templates. These contain the business rules and standard processes
for handling reference data, routing and managing orders, and
settling transactions—and they can be tailored to suit the
requirements of a particular bank.
Reference Check
TMI's initial STP project centered on reference data, one of the key
causes of trade-processing errors. In a survey by TowerGroup, almost
80 percent of respondents cited inaccurate, inconsistent, and
incomplete reference data as a major cause of their failure to
achieve STP within their organizations. Where firms do have
automated processes, almost half the exceptions that occur are
related to reference data.
Coexis worked with TMI to develop a system for the central control,
management, and storage of reference data, particularly counterparty
reference data (names and account details belonging to the
participants in a trade).
Syn~ReferenceData manages static data right across the business from
equities to credit approvals. It provides the "golden copy" of all
data relating to counterparties, which is used by front-office,
compliance, credit, operations, and risk systems across the company.
"TMI were our first client, so we added to our library of
components, because there were things they wanted to do that we
hadn't included," explains Andy Moorley, product manager for Coexis
Syn~. "We then worked with them to implement our rules for their
specific circumstances. That enriched our understanding of what
would be needed particularly for handling reference data, which was
quite a new area."
With Syn~ReferenceData successfully installed, the bank moved on to
activate additional Syn~Settlements functionality. In addition to
achieving a 95 percent STP rate, the firm has become noticeably more
competitive on a cost-per-ticket basis. It is now looking to triple
its volume of business over the next two years, without
significantly increasing spending on staff.
Sun Servers Drive STP
To cope with the volume of business it was expecting, Tokyo
Mitsubishi International upgraded its entire server infrastructure
as part of its STP initiative.
The firm installed Sun Fire 12K servers for high-end requirements
and Sun Fire 4800, V880, and V480 servers elsewhere. The Coexis Syn~
platform runs on a six-way Sun Fire 12K domain, under the Solaris 8
Operating Environment.
"We made a strategic decision to standardize on Sun hardware because
it delivers the reliability and availability required of a critical
financial environment, while providing low cost of ownership," says
Don Simpson, TMI's managing director of operations and technology.
» Sun Servers Drive STP
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