New Research Explores How Securities Industry Can Make Discussion of Post-Trade Technology More Relevant to Asset Managers
NEEDHAM, MA, October 20, 2003�In recent years, straight-through processing (STP) has generated increasing discussion and marketing momentum throughout the securities industry. Today, this catch-all acronym for post-trade technology, integration and automation has become so pervasive that it seems to have taken on a life all its own.
However, new research from TowerGroup says it may be time to deliver a eulogy for the usefulness of this acronym, particularly when it comes to one key audience: the asset manager. The reticence of the buy-side to buy in to STP hype validates TowerGroup�s claim that STP evangelists too often put the cart before the horse�extolling the virtues of integration, rather than the business objectives that integration can help to achieve.
Highlights of the findings include:
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TowerGroup believes that the overexposure of STP as a marketing vehicle has made it difficult to provoke a reaction from prospects. Descriptions of its benefits have become too boilerplate to help financial institutions distinguish between products. The incentive for each industry segment to automate the exchange of information is too often lost within generic value propositions.
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For financial institutions, technology investments will always be focused on achieving specific business objectives. The objectives that can be grouped under the current STP umbrella are diverse: from electronic order routing, to daily reconciliations of cash/securities positions with a custodian, to pretrade compliance, to aggregation of portfolio data for client reporting, to improved portfolio risk management, and more.
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The common thread between this diverse array of projects is that none can be achieved without the integration of data, systems, process and people. In this context, STP is not the driver, nor is it the goal. Integration occurs as a natural precursor and byproduct of other strategic objectives.
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Asset managers have been targets of criticism for their reliance on fax machines and their failure to embrace electronic messaging protocols. Yet this criticism often overlooks the underlying business incentives driving the buy side � such as getting more assets under management. Unless a proposed technology investment can be related back to this and related core objectives, it will rightfully fall on deaf ears.
�STP as an acronym and a unifying concept has served us well in the past, but to increase the adoption of post-trade technology among asset managers, we need to emphasize connectivity, messaging and business applications in a different way,� said Tim Lind, senior analyst in the Investment Management practice at TowerGroup and author of the research. �To get the attention of asset managers, we need to articulate how automation will lead to an improvement in portfolio return, client service and the bottom line.�
Lind noted that it�s probably not realistic for the securities industry to abandon STP completely, given its significant investment in the acronym to date. �The continuing challenge for STP proponents will be how to capture the diversity of so many business objective under one catchy phrase � and make that phrase communicate truly tangible benefits to the buy side,� he said.
TowerGroup�s ViewPoint titled, �A Eulogy for STP and the Asset Manager,� is available for review by qualified members of the press. Those interested in purchasing a copy of the research may contact TowerGroup at +1.781.292.5200 or [email protected].
About TowerGroup: TowerGroup�now celebrating its 10th year�is the leading research and consulting firm focused on the global financial services industry. A respected source for trusted information and advice, TowerGroup brings many of the world�s largest financial services, technology and professional services firms a deeper understanding of the business and technology issues impacting their organizations. Headquartered near Boston in Needham, Massachusetts, and with offices in New York, London, and Kuala Lumpur, TowerGroup serves a global client base. Visit TowerGroup online at www.towergroup.com.
