Your Industry  

Best practice comes of age

Best practice comes of age

During the 1980s stock trading was a manual process. Traders would write out a ticket for an order, this was then collected by a runner who would decipher the hurriedly scrawled note and type the order into a system to create the contract note.

In the bustle, noise and confusion of the trading floor a client order was often different to what was executed by the trader and different again to what was keyed into the system. With a 10-day settlement period most misheard or fat-fingered problems could be sorted out before becoming an issue for the broker, trader or custodian.

However, in the early 1990s as the London Stock Exchange grappled with bringing settlement times down from T+10 to T+5 this approach needed to change. Orders were captured and then passed electronically through all the parties involved in the settlement process without them needing to rekey the same bits of information over and over again, and straight through processing (STP) was born.

Article continues after advert

It was not just the stock market that developed STP solutions; about the same time the Society for Worldwide Interbank Financial Telecommunication (Swift) also started to introduce straight through processing to build on the benefits its standardised messaging had delivered for banking institutions.  

With no physical product, data and information are the core components of financial services, so wherever there is a high volume, repeatable activity needing the same chunks of data, there is opportunity for an STP solution.

If we follow an Isa application form received by a product provider then we might see the customer's name and address keyed into a system for identity verification, the customer's name and investment choices then entered into an illustration system, those same details along with the address then keyed into the line of business system to create the policy record and eventually some client information finding its way onto an HMRC return.

All this information was also likely to have been keyed into an adviser’s system before even arriving at the Isa manager's door. STP operates on the principle of inputting information once, then reusing it and adding to it throughout the transactional process, so our application form should be entered somewhere once and the packets of information needed by different systems would then be electronically shared to remove the rekeying.

Where product providers use multiple systems (and most do) straight through processing has been pursued internally to create electronic links between disparate systems and realise the benefits of reduced data entry, reduced risk and increased accuracy for the provider.

Creating this straight through process and realising the benefits is, however, more than just a technological challenge. For technology to solve a problem, particularly a processing problem, it is important that the process is properly understood and mapped out in a logical manner with a clear view on the policies and principles that need to be applied.