Why do post trade STP projects fail?

Industrialisation of operational processes, improving settlement efficiency, focus on cost, STP – these are all common phrases or terms to indicate a plan to improve settlement rates, reduce failure and inherent cost, and of course to offer better client service.

To judge how successful these are on an industry level is a big ask, but those that are willing to engage with us to debate and define are welcome!

In an industry that generally - in established processes at least - has STP rates of 90%+, the need to industrialise or improve post trade processing today is primarily cost or regulatory-led.

Given the importance of this today, let’s take a look at a few of the more prevalent reasons for failures or protracted launches.

Lack of standardised approach: Standards, while sometimes onerous at first to implement, do mandate community adherence to what is deemed necessary and correct and become easy to maintain once established. History is littered with examples of non-standard processes and failures of market adoption, be that ‘common’ matching or static utilities, settlement practices in certain markets, or GSTPA. Of course, lowering the barrier to entry is important, but not at the cost of a project or programme meeting its objective. The further a process is standardised, the easier it is to globalise, maintain control and connect multiple trading counterparties.

Budgetary challenges: At a time of diminishing return on equity, and cost centres being considered increasingly ‘costly’, to secure and retain budget for change is challenging. Business cases must see same-year benefits in many cases, and in some cases have front office support (particularly those where revenue defence is the primary driver). 

Community: The industry is increasingly asking for standardised, multi-asset solutions, to avoid using a multitude of different platforms for different operational flows, while trying to prevent a monopoly of one solution and have an element of competition to drive good behaviour, pricing and healthy balanced competitive functionality. Quite a challenge. The solutions that manage to bring or engage community involvement, thus increasing use and trade capture, are more desirable than those which bring partial flows or take a longer time to build usage.