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Managing CSDR: Resolving Exceptions and Dealing with Trade Fails

By DTCC Connection Staff | May 14, 2021

Matt Johnson, DTCC Director, EMEA ITP Product Management and Industry Relations, recently met with industry experts at DTCC’s CSDR Series 2021: CSDR Management with ITP Solution event to discuss ways to mitigate CSDR penalties by quickly resolving trade exceptions and facilitating the management of trade fails.

Joining Johnson was an impressive panel of experts including Craig Stirling, Executive Director – Fleet Lead Cash Confirmations and Statement & Global Cash Equities CTB Lead, Morgan Stanley; Garret Browne, Senior Manager, Head of Post Trade for Equities, Fixed Income & FX, Fidelity International; Mark Austin, Principal, Head of Trade Support, Connor, Clark & Lunn Financial Group; and Philip Slavin, Chief Operating Officer & Co-Founder, Taskize.

Importance of Workflow Visibility

With the clock ticking until the regime begins, firms are very much focused on the possibility of fines and buy-in issues. There are already markets with varying penalties and potential buy-ins, and CSDR is adding the burden of an additional 27 jurisdictions. Given these complexities, a consolidated view is essential, as information currently comes in through numerous channels, including emails, client portals, and phone calls. DTCC’s Exception Manager provides the oversight and the benefit of consolidating all possible scenarios into a single view. Slavin noted the ability to have visibility through the entire workflow chain is a significant driver for efficiency, particularly having all exceptions in one place—no matter the region, asset class or type of transaction.

CSDR will force a rebalancing of resources and emphasize pre-matching functions to ensure trade affirmation. Getting all the information for standing settlement instructions (SSIs) will be crucial to managing inventory. “Fails will still occur due to issues outside of operations, and at the same time, we can do better by utilizing analytics, monitoring broker behavior, and establishing patterns,” stated Brown. Improved communications, utilizing real-time channels, and decreasing reliance on email will help reduce the time frame to settlement and help improve behavior. Austin agreed that getting the right settlement message on trade date is priority; followed by focusing on pre-matching trades prior to settlement.


"With the clock ticking until the regime begins, firms are very much focused on the possibility of fines and buy-in issues."


Communication is Key

Stirling stressed the importance of communication and that manual processes will pose delays. “Active real-time communication that is linked to a workflow and provides a quick resolution will be key,” he said.

The panelists agreed that there will be an increased need for predictive analytics solutions as the industry starts to move to shortened settlement. Each firm will need to base their decisions on their particular needs, but as Slavin pointed out, “No matter how hard we try, there will still be fails, and firms need to be good at solving those fails.” Knowing about an exception before it occurs is vital. But while proactive tools can help—even the best tools only work with communication and interoperability.

With an industry as interconnected as financial services, the stakes are higher as all parties of the trade are impacted if something on the chain breaks. Increased communication and engagement are needed not just for CSDR but for the industry at large. Slavin noted, “Communication and standards between platforms are vital. Interoperability has to be embraced in order to provide the right solution.”

Need for Timely and Accurate Data

While driven by regulation, these best practice issues will need to be addressed because the global aspect of these issues is no longer just a CSDR problem, noted Johnson. As the demand for information grows, clients need access to timely and accurate data to develop a complete picture of the settlement landscape. The sharing of data can pose other issues, and the interactions between platforms will only work if all parties use platforms that are interoperable.

Citing the move from a paper environment to electronic trades, Browne noted that good things have come from regulation. To improve the visibility around settlement exceptions, behaviors still have room for growth, as trades will have a better chance of settling if instructions are accurate.

The Future of Post-Trade

Johnson closed the panel by asking participants about the future of post-trade. The panelists agreed that practices will evolve in response to CSDR and that further acceptance of capabilities and solutions is needed, including enhanced workflows that focus on the direct economic cost. New fintech and partnership opportunities will need to be consistent, interoperable, and forward-looking, with a goal toward reduced exceptions and a lowering of the age profile.

With less than one year until the CSDR regime goes live, the industry is focusing on many unknowns—the size of the amount of fails, the question of buy-ins, and the best ways to get ready. With an eye on guidance from ESMA, DTCC continues to focus on preparation, automation, and prevention.

Matt Johnson, DTCC Director, ITP Product Management
Matt Johnson DTCC Director, ITP Product Management

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