New survey of global broker-dealers analyzes costs across cash securities operations and finds opportunities for individual firm cost reductions of 20-25% across the post-trade lifecycle
New York/London/Hong Kong/Singapore/Sydney, November 18, 2020 ‒ Certain post-trade processing costs for cash securities at large broker-dealer firms could be reduced by 20-25% through automation, according to a recent survey of nine of the world’s leading broker-dealer firms by The Depository Trust & Clearing Corporation (DTCC), the premier market infrastructure for the global financial services industry.
With the industry facing increasing cost pressures and evolving regulatory requirements, DTCC’s survey confirmed that by leveraging post-trade automation, firms can eliminate redundancies and manual processes, reduce associated costs, and mitigate operational risks.
DTCC analyzed individual broker operating costs to estimate potential efficiency and cost savings by leveraging the full suite of DTCC’s Institutional Trade Processing (ITP) solutions, which enable no-touch processing from trade agreement through to settlement finality.
The survey found that, for large global broker-dealers that typically spend roughly $150 - 175 million globally on post-trade services related to cash securities, implementing a no-touch processing workflow can reduce headcount, repair charges, technology expenses and claims and fees significantly.
More specifically, DTCC was able to estimate cost savings that could be achieved within larger broker-dealer firms in the following operational areas through the adoption of ITP solutions:
- SSI reference data - $1.5 million per firm
- Trade support - $7 million per firm
- Settlements - $10.8 million per firm
- Agent bank fees - $2.3 million per firm
- Asset servicing - $2 million per firm
- Financing - $5 - 10 million per firm
- Technology expenses - $5.4 million per firm
For mid-sized and smaller broker-dealers, the use of a no-touch workflow could enable higher levels of automation and increased scalability to more effectively handle volume spikes, all of which would not typically be affordable or possible to replicate with internal resources.
Matthew Stauffer, Managing Director, Head of Institutional Trade Processing at DTCC, stated, “The findings of our survey highlight the benefits of leveraging automated post-trade solutions to reduce the costs of operational functions and the risk inherent in manual processes. The adoption of a no-touch workflow allows firms to focus their resources on the parts of their business that create true value.”
# # #
Notes to Editor
To produce this analysis, DTCC surveyed a group of global broker-dealers on a range of costs across their cash securities operations. Asset classes covered included equities, bonds (plus their prime brokerage) and repos. DTCC did not survey firms around OTC derivatives, listed derivatives, FX and loans.
To estimate savings, DTCC assumed the adoption of ITP services at a rate of 70% by the broker-dealers’ institutional and hedge fund clients. The impact on resourcing and related expenses was ranked as high (50%), medium (25%) or low (10%). The majority of savings were driven by existing ITP services.
The assumptions and results were reviewed by individual broker-dealers and a group representing the global sell-side community prior to issuance.
With over 45 years of experience, DTCC is the premier post-trade market infrastructure for the global financial services industry. From operating facilities, data centers and offices in 15 countries, DTCC, through its subsidiaries, automates, centralizes and standardizes the processing of financial transactions, mitigating risk, increasing transparency and driving efficiency for thousands of broker/dealers, custodian banks and asset managers. Industry owned and governed, the firm simplifies the complexities of clearing, settlement, asset servicing, data management, data reporting and information services across asset classes, bringing increased security and soundness to financial markets. In 2019, DTCC’s subsidiaries processed securities transactions valued at more than U.S. $2.15 quadrillion. Its depository provides custody and asset servicing for securities issues from 170 countries and territories valued at U.S. $63.0 trillion. DTCC’s Global Trade Repository service, through locally registered, licensed, or approved trade repositories, processes over 14 billion messages annually. To learn more, please visit us at www.dtcc.com or connect with us on LinkedIn, Twitter, YouTube and Facebook.