Academic journal article ABA Banking Journal

Need for Speed Builds in Securities Processing

Academic journal article ABA Banking Journal

Need for Speed Builds in Securities Processing

Article excerpt

At ABA's Operations Conference for Securities, Brokerage, and Trust in Miami Beach last month, the Internet's impact on operations--with its tendency to speed the transaction cycle and raise customers' expectations on service--was duly noted.

The Internet, with its "go-go" paradigm, has increased the need for even quicker responses to a market that's moving toward increasingly extended trading hours.

The greater play of electronic communications networks (ECNs), for example, has pushed the physical exchanges toward rethinking their organization and policies, with several schemes under consideration. Also being mulled over in the age of the Net is the proposal for brokerage firms to move to T+1 (or next day settlement) for securities transactions.

Unlike previous efforts to shorten settlement from five to three days, which amounted to pushing existing systems to their limits, the move to next-day settlement would require a complete overhaul of trading systems and operations.

It also necessitates "straight-through processing" (e.g., enter data once and funnel it through multiple systems without re-entry) both within individual organizations and on a grander scale, between companies and exchanges.

Speakers from the banking, brokerage, trust, and regulatory sides of the issue all reiterated a common theme: the Internet has challenged the financial services industry as never before, but also presented an opportunity to dramatically re-engineer operations for superior performance.

Internet challenges

One speaker, Chet Thompson, senior vice-president of Huntington Bank, Columbus, Ohio, said that in addition to changing the back office considerably, the Internet presented his bank with new risks to manage, including greater privacy and security risks. …

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