The Global Straight-Through Processing Association, somewhat conveniently referred to as the GSTPA, is limbering up for a busy year ahead.
The industry association, which is open to investment managers, broker/dealers and global custodians involved in the processing of cross-border trades, will begin testing of its latest initiative – Transaction Flow Manager (TFM) – in March, before eventual implementation of the system in quarter four.
TFM is a facility that will act as a network for central and continuous trade communication. Currently, the trade process does not continuously flow through to all concerned parties. This can lead to failed trades and higher than necessary risk.
TFM is also expected to reduce the time and resources needed to deal with trade repairs and ensure more timely and accurate information for users.
Frances Harrison, manager in the strategic development and support area of HSBC’s Global Investor Services arm, who keeps abreast of many of the developments of the GSTPA for the groups custody operations, explains the impact TFM will have on the ground: “TFM is a utility where there is designed to be pre-matching of cross border trades. At present there are a number of different messages in the chain, for example a message goes from an investment manager to a broker back to an investment manager and then to a custodian.
“The purpose of the transaction flow manager is to have a system where all that information is recorded, so that at any time any one of those parties can input information to complete the details about the transaction, or likewise draw information from the system about a transaction relevant to them.”
Harrison points out the advantages of TFM for someone working in the global custody area: “At the moment we can get instructions at the very last minute and then you are pressurised to go out and match with the counter-party at the depositary.”
“The benefit of this system is that it will give us early warning about transactions. In essence it means that the settlement party involved in the transaction gets information from the other settlement party, so you get the details much quicker.”
At the end of last year the GSTPA asked for groups to be involved in the pilot testing of TFM and received a healthy response from the market.
“At the moment those organisations involved in the testing are gearing up the systems and sorting out procedures for how they are going to test the system,” says Harrison.
Testing will run through to September, prior to the introduction of TFM in quarter four.
GSTPA has selected Axion4 – a consortium comprising Segaintersettle, TKS Teknosoft and Swift – to develop the TFM system. The GSTPA also awaits the arrival of T+3 settlement for the UK on February 5.
As yet there are no plans to move towards T+1 and indeed the US recently postponed its T+1 plans until 2004 from the provisional 2002 marker.
Harrison comments: “I don’t think there has been much talk in the UK yet about achieving T+1 and I think we are just waiting to see what happens with T+3.”
She notes that T+3 is a relatively easy step to make because there are no major system changes involved for anyone involved in settlement in the UK: “What is important is to ensure that you get timely instructions from your client, but that’s always been important anyway.”