Straight Through Processing Systems

Straight Through Processing (STP) is a relatively new paradigm in the financial markets industry, aimed at bringing greater automation to the trading life cycle, thereby eliminating (or at least minimizing) settlement risk.
Currently, at most financial service firms (whether fund managers, banks or brokers, whether buy-side or sell-side) there is still a fair amount of manual intervention across Finance Tips Articles this life cycle, often involving re-keying of data (or at least manual uploading/downloading of files and cutting/pasting information into spreadsheets for example).
Straight Through Processing aims to eliminate all of this. In a true STP environment, everything would be fully automated and electronic, from order/trade capture (front office), Fastest Payday Loans through risk checking and trade allocation (middle office), right on to settlement and clearing of the trade and processing of the associated payment (back office).
So what kind of systems need to be put in place to facilitate this? Generally, firms do not try to implement one all-singing all-dancing “STP system”. That would not work for a number of reasons. First, the scope of functionality required would be too broad. Second, firms already have systems in place to cater for existing requirements in the front, middle and back office and often they already satisfy a number of requirements.
No, generally the way STP solutions operate is by linking disparate systems together and replacing just the weak links in the chain. To accomplish this, the STP modules need to be very open and be able to send and receive messages to and from a wide disparity of legacy systems in virtually any format.
Speed of throughput is important here, as is scaleabililty (i.e. the ability to scale to meet the demands of firms who can sometimes process millions of transactions per day.
Stability is key too, as downtime can be very costly in the financial markets environment.
Finally, these systems have to be extremely secure, as they are linking into banking systems that hold sensitive data, so while they need to be open enough to allow them to communicate with the various platforms out there, they can’t be so open that they can be hacked or accessed fraudulently.
With the right components in place linking up their exiting proprietary or legacy systems, most firms should be able to achieve straight through processing and reduce their settlement risk.

READ  Advantages of Automated Trading Systems Over Humans