Several steps need to be taken to make those automations happen, and operational teams need to be prepared for the areas where they will inevitably see work increase in the wake of T+1 go-live – for example, communications.
While much of the trade lifecycle is STP (straight-through-processed)for most financial institutions, the sheer volume of transactions means that a bank moving $1 trillion daily with ~99% STP still has $10 billion worth of transactions that require manual intervention. These manual interventions can take many forms (affirmations, confirmations, allocations, SSIs, or trade exceptions) but still require unstructured communications to resolve.
Teams will feel the direct impact of increased client and counterparty inquiries on shared email inboxes and other industry collaboration tools and while some of these flows have been improved with industry exception networks, there are still many players in the market that will have to handle these manually. Plus, small players that must handle email inquiries manually mean their counterparties still have to have enough operational capacity to handle manual resolutions via email, industry chat, and industry exception management simultaneously. With T+1, all these streams must be managed in less than a day.
Most of these teams are already operating in an incredibly lean operational capacity from the past years of streamlining operational costs and outsourcing aspects of trade resolution. T+1 will put additional strain on these teams which could result in more trade fails, counterparty risk, liquidity issues, and financing costs.
So how do these lean operational teams manage higher incoming communications volumes combined with the need for quicker turnaround and resolution that comes withT+1? Automation.
We love talking about automation or AI as the answer, but we forget that there is a journey needed to get to these automations. Because email communications around exceptions are unstructured, there is an inability to automate these immediately with AI. Teams need an easy way to structure the unstructured workflow of comms and gather metadata around communications, and then we can deploy AI tools to automate these even further and reduce the impact of T+1.
This is where a tool like QMA comes in. First and foremost, QMA will help teams increase transparency and prioritisation of actionable inquiries that come in from email and chat. The functionality will help teams track their response and resolution times for unstructured queries, as well as highlighting the root cause of queries. Combine this with customisable rules and alerts to identify risky exceptions before they are escalated, and you can start to see value in a team’s capacity spent on emails and chats about exceptions.
Firms then find themselves with a rich set of metadata about a team’s communication process, as well as where the bottlenecks may be dependent on other operating teams or functions. With this information, AI can be properly leveraged as well as real-time API integrations to further increase productivity and shorten the resolution turnaround time.This process will continuously improve with data that will help continue to reduce the post-trade activities required to meet trade settlement and position firms to eventually move to T+0.
At face value, a move from T+2 to T+1 seems like a 50% reduction in time available to resolve all exceptions, but when you consider all the different time zones, it signifies closer to an 80% reduction in that available time.
In a T+1 world, communications and quicker query management will no longer remain a luxury, but a necessity.
If you're interested in finding out more about how Delta Capita can help you, get in touch today.
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