The Building blocks of Real-time Intraday Cash and Liquidity Management
Posted on 9th March 2020 at 16:25
What are the building blocks for an efficient cash management function?
There are few areas that require systems and people to interact as seamlessly as in cash and intraday liquidity management. Over the coming weeks we at Cupula will shine a spotlight on these activities and give some insight into how we can help improve your cash and inventory projections. Please take a look at the 3 min read below and leave a comment. In this blog we'll concentrate on the 1st of our Post Trade activities....client on-boarding.
Operations, Settlements, Back Office, Post Trade...there are a myriad of labels for all things that happen after the Front Office says "done". But this isn't the beginning of the journey for resulting cash and security movements. To get a full picture we need to go back to when the client was on-boarded. The client data captured at the beginning of a relationship that feeds the Trade Management System (TMS), will form the foundation for straight through processing (STP) activity and that holy grail of client relationships, "frictionless interaction". This data needs to be a rich seam, which other systems and processes in the stack can tap into in order to pull all the relevant information.
Pivotal to the alignment of cash and security positions are the Standard Settlement Instructions (SSIs). These are the primary instructions that will advise where the cash and securities will settle and instruct correspondent banks and custodians accordingly. Unfortunately multiple SSIs can be allocated to a client, which in turn can create erroneous instructions being sent out, resulting in incorrect payments and late settlement of trades.
This in turn will have a domino effect and create a whole host of of other issues - long/short balances both cash and securities, potential buy-ins, interest claims, the list goes on. Regulators take a dim view of persistent offenders and this makes the need for current and reliable client data even more pressing.
The flip side of cash is the security settlement information and additional data sets required for margin calculations. There will usually be different margin requirements for government debt compared to corporate, prevalent in the security financing world.
So as you can see, client on-boarding, with its multiple data points and the need to "get it right" is of paramount importance.
Now imagine having the ability to trend interactions so that you can quickly build up a settlement profile of a client. How many "fails" and over what period? Was there a particular product type or currency that caused the issues? How long did it take to identify and resolve errors?
This will shift your stance and enable a proactive approach to issue resolution.
Here at Cupula we are working with market leading software providers that will offer insightful analytics that will in turn, empower both you and your client base to better understand problems and their root cause.
Please feel free to contact us with any questions or comments, it would be great to get some feed back on this subject or any other associated with collateral, cash and intraday liquidity management.
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