The back-office systems of the world’s largest investment banks are at breaking point from escalating trading volumes, Financial News reports.
Heavy trading volumes, particularly in credit derivatives and credit default swaps, have exposed weaknesses in the systems used by some investment banks for clearing these complex products, leading to backlogs of trades awaiting confirmation.
Trading volumes on Friday, Aug. 10, were so high that at least two top investment banks’ credit derivatives teams had to work over the weekend to clear confirmations. One banker said it was lucky the spike happened on a Friday, giving his team two days to catch up, or they would not have been able to open for business on Monday.
A European bank said Aug. 10 was its busiest trading day to date, when it traded 20 percent more in volume than it thought its systems could cope with. A big U.S. bank is understood to have fallen one week behind with its confirmations.
One provider of derivatives technology said: “Electronic confirmation rates are higher than they used to be but what the banks aren’t saying is how much manual work goes on behind the scenes getting the trades ready for matching.”