Post-trade management refers to activities that happen after a trade is executed. A closely related concept is trade lifecycle management.
Post trade processing software aims to ensure a smooth path to settlement and validate that all service providers and systems have correctly represented the trade.
Buyside post trade management systems streamline processes, reduce manual intervention, and enhance middle and back office efficiency.
The image below illustrates the steps in the investment lifecycle. Post-trade processing includes order allocation onwards, plus reconciliation.
Key capabilities include:
Trade affirmation involves verifying the specifics of a trade between you and the broker after its execution. Essentially, this process aligns the trade confirmation with your understanding of the trade details, often reflected in your trading system.
Confirming and affirming trades help detect discrepancies between you and the broker at an early stage. This early detection reduces the risk of costly errors and disputes later on. Affirmed trades are more likely to settle efficiently on the agreed settlement date. Prompt affirmation minimises the chances of trade failures and enhances overall settlement efficiency.
A post trade processing solution is able to communicate SSIs (Standard Settlement Instructions) to the custodian. The SSIs contain information about how a trade should be settled, such as what bank account it should settle on and in which currency.
Automating this communication and not relying on rules at the custodian enable timely, correct and cost-optimal settlement for all trades. In short, the settlement process becomes as automated as possible.
Reconciliation means ensuring that one or more systems or service providers share the same data view. Data that are typically reconciled post trade include:
| Reconciliation data | Example |
| Positions | Between the trade order management system and fund accounting |
| Cash | Between custodian and Investment Book of Record |
It’s essential for reconciliation to be multi asset class, handling any type of instrument type you’re investing in.
Post-trade management software offers two main advantages over manual processes: improving efficiency and reducing risks. This innovative technology enables asset managers to achieve unparalleled efficiency and accuracy by automating and streamlining crucial tasks.
By leveraging post trade management solutions, you can significantly reduce processing times. Automated workflows eliminate the need for manual processes, which means faster trade affirmation, settlement, and reconciliation. This enhanced efficiency translates into cost savings and improved operational performance.
Naturally, the higher your trade volumes are, the more you will gain from automation.
Robust post trade management systems help mitigate risks associated with manual processes. Through automation and real-time data visibility, these solutions enable firms to identify and address potential issues promptly.
Advanced features such as exception-based workflows mean the system is fully automated until it identifies an anomaly. The anomaly is immediately flagged to your operations team to act upon and move to resolve.
While post trade management software offers numerous benefits, implementing these solutions has challenges. Here are some key considerations to keep in mind:
At Limina, we recommend that a post trade processing software is an integrated part of your investment management system, not a standalone system. By such a setup, you overcome all three challenges listed above.
We see two potential disruptions possible:
Blockchain and distributed ledger technology (DLT) can potentially transform post trade operations. By providing a secure, transparent, and immutable record of transactions, blockchain can eliminate settlement times and reconciliation needs. This would be a major shift, but it's also very unlikely to happen.
Artificial Intelligence (AI) can drive more innovation. AI-powered systems can analyse vast amounts of data, identify patterns, and identify exceptions. The technology is partially there already today.
The adoption of cutting-edge software solutions will drive the future of transaction lifecycle management. Through automation, real-time processing, and advanced exception-based workflows, buyside firms can significantly enhance their post-trade operations in:
Those who invest in robust post trade solutions will be well-positioned to keep costs low and incidents away. Left in the dust are inefficiencies and risks associated with manual processes.
Embarking on this transformative journey requires careful consideration of integration challenges and cost-benefit analysis. To witness the power of automation firsthand, see Limina’s post trade management software in action today.