Straight Through Processing (STP) is not just an operational initiative. As a strategic imperative any STP program should look beyond a one-time operational plan with a limited objective of achieving a reduced settlement cycle.
Straight Through Processing,
the seamless integration of systems
and processes spanning
the entire securities trade life cycle,
has several strategic imperatives.
This means that one should not look
at STP initiative as a one-time operational
plan, which has the limited objective
of achieving a reduced settlement
cycle. The general tendency is to
measure the success of STP initiatives,
undertaken by an industry participant,
in terms of cost savings or
minimization of failed trades. But the
real measure is its impact on the competitive
position of the participant.
This could be in terms of the ability to
rapidly introduce new products, improve
customer service levels, reduce
market and operational risk, or
handle large volumes due to new
products or asset growth.
The biggest challenge in STP is to
determine the best approach to adopt.
This is due to certain key factors—the
two elements of STP strategy: Internal
STP and external STP. Internal
STP relates to the trade and settlement
processes that are internal to an
industry participant. For example, in
the case of an investment manager,
this includes authorization of orders,
placement of orders with brokers, receiving
details of executions, allocation
process and so on.
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