Launched in conjunction with industry partners Currenex, Bloomberg, Icap and Logicscope, the Electronic Settlement Network (ESN) provides an outsourced, on-demand processing hub for financial institutions, eliminating the need for large investments in IT infrastructure, upfront software license fees and ongoing operating costs.

Its services span the entire post trade lifecycle including position management, P&L, deal confirmation, settlement, credit exposure, cash management, scenario and risk analysis, accounting, reconciliation, overall workflow and reporting.

Wall Street Systems' last foray into providing outsourced post-trade processing services was the Settlement & Operations Clearing eXchange (SOCX) - a joint venture with Deutsche Bank, that launched in 2001 but failed to win any clients. The venture closed when Deutsche Bank took its processing back in-house in 2003.

Tony White, managing director of product and research and development at Wall Street Systems, says the vendor learned a few important lessons from that experience.

"The costs and risks of many outsourcing arrangements are seen as being too high, so we've gone with a pay-as-you-go model for ESN, where we assume all the risk," says White.

"Having a bank involved as an owner of the utility is also not the best thing, as other banks don't want to benefit their competitor by helping reduce their cost of processing," he says. "And SOCX was also too technical, which turned off a lot of the tier two banks that could have been clients. So we've tried to make connectivity and client on-boarding as easy as possible by partnering with Logicscope."

Wall Street Systems also partnered with Logicscope last year to add post-trade notification and STP capabilities to its Wallstreet FX ASP hosted foreign exchange dealing system.

Wall Street Systems claims the on-demand ESN service sets the benchmark for the lowest trade processing costs in the industry. "It's coincidentally good timing to be launching such a service," says White. "With the current restructuring in the financial services industry there is an increased cost focus and a shift back to vanilla products. Tier two banks are also aware that there's no competitive advantage in trade processing."

Rajeena Brar, consultant at Pierre Audoin Consultants (PAC) says: "As FX further establishes itself as a fast-growing asset class, a utility model such as this is a natural evolution for the industry. This has been evidenced by the adoption of shared service models in other sectors, which have drastically improved operational efficiencies and costs."

On the issue of cost, White believes that lots of banks are deluding themselves about the true cost of processing, particularly small banks that don't have the volume required to run a cost-efficient processing operation.

While individual bank circumstances will vary, Wall Street Systems claims that ESN can reduce average cost per trade from $25 to under $1.

The company currently has three pilot customers that have been trialling the service - describes as "tier two banks", although one of them is among the top 10 banks in the US. In terms of geographic focus, the service is initially targeted at North American and European firms. The vendor hopes to have five clients on board by the end of this year and 10 by the end of 2009.