a non-active Finextra member
Buy Side OTC operational improvements : A Project for 2008?
03 Apr, 2008 22:30
Research just out from Tabb estimating that banks will spend $70 million on automating OTC derivatives processing this year is welcome, yet it’s still a fraction of what really needs to be spent. Even if many of the big sell-side firms have invested heavily,
there remain so many counterparties who have yet to even recognise that it is relevant to them. Most still stick to their comfort zone and that’s manual processing. BIS statistics for 2007 vs 2006 show a record growth of 135% in OTC derivatives volume. Markit
research shows the average number of outstanding confirmations doubled year-on-year from 2006 to 2007. That means operational performance issues, a massive impact on risk management procedures and firms working off poor data. If an asset manager adds 100
per cent more volume in a year, then they cannot just double the size of their back office operations as the people simply aren’t available – plus more staff maintains the risk of human error and reduces margin gain from greater volume. So what’s the message?
Same as its been for a long time – now is the time to automate your OTC derivatives processing. Now is the time for the majority to take stock and make it a priority.