Mitigating Risk, Improving Efficiency

Here’s How DTCC’s Exception Manager Reduces Cost and Risk in the Settlement Process

By Kristine Flyntz | Jun 12, 2018

Here’s How DTCC’s Exception Manager Reduces Cost and Risk in the Settlement Process

Efficiently handling the post trade exception process remains a shared industry challenge that currently drives a significant amount of cost for all trading counterparties. In fact, a recent survey of 364 clients conducted by DTCC showed that 49% of respondents are incurring “very high” to “moderate” costs for fixing trade exceptions and the two most important types of costs incurred were in labor and time.

Learn more about the survey here.

To help with this burden, DTCC has recently launched its DTCC Exception Manager platform to publish, manage and communicate on trade exceptions in a more streamlined way. DTCC Connection sat down with Simon Daniel, Director, Institutional Trade Processing Product Management to discuss how DTCC Exception Manager works and the benefits it brings to the industry.

DC: Why did DTCC create the Exception Manager platform?

SD: The creation of DTCC Exception Manager was in response to feedback from our clients to improve the current state of exception processing. Post-trade exception processing drives a significant proportion of operations headcount for all trading counterparties. Data is consumed and processed from many disparate systems (e.g. matching platforms, trading counterparties and market infrastructures), often obscuring the root cause of trade failures. On average, one exception can create as many as 30 related emails, which is overwhelming and introduces risk for DTCC’s clients.

DC: What does it do?

SD: DTCC Exception Manager is a venue to publish, view and communicate on exceptions throughout the trade lifecycle process. It centralizes and standardizes exception processing to enable faster exception resolution and will enable us to analyze data for root causes and outliers to improve existing processes or offer new services to eliminate the common exceptions.

Our immediate vision is to create a central portal, providing a single view of all post-trade exceptions. However, as a tool to help centrally resolve challenges, clients are asking DTCC to continually assess how it might be applied to other current issues that will need a similar type of solution. For example, the upcoming Central Securities Depositories Regulation (CSDR) requirements will impact operations and this service could help our community. As such, we expect DTCC Exception Manager’s scope of capability to continue to expand.

The platform supports all types of post-trade securities exceptions from blocks to fails. This includes trade date exceptions, central securities depository (CSD) pre-settlement exceptions and fails. The initial focus are pre-settlement exceptions and fails on equities and fixed income. A configurable dashboard provides the ability to organize and measure the exceptions by various criteria with a subsequent drill-down capability. Exception records will have an exception owner category to enable assignment to individual users. Rules-based logic will support efficient work assignment and prioritization on exceptions. The platform supports secure communication among the user community including machine-generated emails on the exceptions and chat.

What is an exception?

An “exception” refers to a transaction that requires user attention to ensure the transaction settles successfully. To handle these exceptions, firms have historically been sharing and consuming data from many disparate systems including matching platforms, trading counterparties, settlement entities and market infrastructures. The related communication, predominantly emails, is overwhelming, cumbersome to manage, and introduces risk.

DC: What types of firms can use this platform?

SD: All organizations in the trade lifecycle can use this platform, including buy-side firms, custodians, prime brokers, outsourcers and their underlying clients, broker dealers, clearing brokers and other settlement agents. Typically, buy-side participants will be users of the platform while sell-side participants will act as both data providers and platform users.

In addition, DTCC Exception Manager supports transactions between the same or different organization types (e.g. broker-to-broker or broker-to-prime broker transactions). DC: What are the benefits to using DTCC Exception Manager?

SD: In the short term, the service will reduce the time and effort to resolve current exceptions by capturing, consolidating and facilitating exception resolution. Then, in the medium term we’ll use metrics, analytics and reporting to focus on root-cause to ensure common exceptions do not re-occur.

To break it down further by organization type: for investment managers, it eliminates the need to manage multiple counterparty feeds by providing a single, consolidated, global view of “at risk” trades. Increased transparency and efficiency come from the configurable dashboard and communication via chat to expedite exception resolution. For broker dealers it helps reduce claims, buy-ins, market losses and/or capital charges and can help to reduce the headcount assigned to exception investigation and resolution. Mutual transparency around high risk trades comes from the configurable dashboard and communication via chat to expedite exception resolution.

And, for custodian banks, it provides visibility into client trades and creates a more proactive exception resolution process, ultimately reducing the number of failed client trades. A configurable dashboard, workflow tools and communication via chat facilitate timely exception resolution, client communication, and reporting.

DC: Where can clients learn more about DTCC Exception Manager?

SD: For more information on DTCC Exception Manager please visit www.dtcc.com/exceptionmanager or contact us.


 

 

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