Post Trade Repo: Let’s win back time in 2022

At the outset of a new year, it’s common to make new year’s resolutions for personal improvement – eating healthier, exercising more often, keeping a gratitude journal. When reflecting on your business goals for the year, are there specific areas you’ll be focusing on in 2022? One thing we would all like to focus on achieving is more time – in work and life, we could all use a little bit more! Colleen Stapleton, Business Development Lead for Post Trade Repo in the US, suggests why increasing operational efficiency is something we can all improve in the year ahead.

What is the situation with manual intervention in markets?

Large volumes of transactional activity are still managed manually in post-trade repo markets. A Finadium study earlier in 2021 found that just 37% of repo transactional volume was traded electronically with STP in North America and Europe. However careful you might be, and no matter the amount of checks and balances you have in place, the fact is that human error will happen, leading to failed trades, misallocated funds, and extra payments needed. 37% is a good start but there’s a huge opportunity to improve on this figure. The promise of more electronic trading and automated matching should lead to a natural decrease in these fails and associated operational costs.

Could 2022 be the time to move away from emails and chat in post-trade processing?

The opportunity for automation is ripe, with technological advancements making it more efficient for computers to extract information from emails and chat than for people to manually read these messages and input data into new systems. When you rely on human readers to cut and paste data from emails and chat into management systems, you undoubtedly leave the door open for errors to come in. Automation has proven beneficial to operational efficiency across asset classes and now it’s time for repo markets to catch up.

What role will the implementation of CSDR have in the push for greater operational efficiency?

The pressure of regulatory change is often an important driver of change. CSDR, with its penalties for failed trades and late matching due to come in as of February this year, provides another impetus to review post-trade processing efficiency. While the regulation might be an EU initiative, it will still have a global impact. Any party failing to settle a transaction in a European CSD, even if domiciled in the United States, will be penalised. The threat of penalties has a commercial impact if processing is inaccurate and firms in the US can’t get complacent, believing all the work to get ready for CSDR has to be done in Europe alone. Moving activity to standardized matching platforms can directly reduce potential CSDR fines, making it more cost-effective to do business.

What will a move to a T+1 settlement cycle mean for the industry and is it a realistic achievement?

Trades are settled on a T+2 basis at the moment, but we are confident that a move to T+1 is achievable. There are a lot of processes involved in settling a trade, but it will be possible to settle within one day if resources are reallocated correctly and the right systems and technology are in place to support a complex market. More efficient post-trade processes and a T+1 settlement cycle can only be good news for the industry, producing more information and data which impacts the overall efficiency of trading in the secondary markets.

Get in touch to learn how MarketAxess can help you move your Repo confirmations into the 21st century this year.