How comprehensive is DTCC’s coverage of standing settlement instructions?
At present, ALERT contains over eight million standing settlement instructions (SSIs). ALERT maintains a unique market position that enables the industry to utilise a central utility to reduce trade fails and increase operational efficiencies through the sharing of SSIs. Our community realises significant benefits from the centralisation and automation of high quality “golden source” data.
Our aim is to achieve 100% coverage of all SSIs in all markets and all asset classes. That’s a substantial goal given we’re at about 60%* market coverage today.
What is your strategy to close that gap?
We have a multi-pronged strategy to achieve full automation; this requires multiple and concurrent efforts to address “manual” non-ALERT clients as well as further progressing the migration of our active community to the optimal Global Custodian Direct (GC Direct) workflow.
In support of 100% automation, we offer programs that enable the entry of SSI data for all market segments such as the ALERT Automating SSIs Together (ASSIsT) programme which facilitates the entry of “manual” non-ALERT SSIs for the buy-side community. We also have a broker lift-out service which is a similar programme for the sell-side. Both programmes are full operationally managed services addressing the industry’s need for cost reduction as well as furthering technology implementation and automation. Once an SSI is in ALERT, it can be easily converted to a GC Direct managed SSI which is the ultimate goal.
Most importantly, is encouraging the adoption by the active community of the GC Direct workflow. Using ALERT’s GC Direct workflow, Custodians can administer settlement instructions for their buy-side clients with the industry standard ISO 20022 compliant messaging. SSIs managed via the GC Direct workflow have recently surpassed one million, a material milestone, with early adopters reporting reductions in trade fails of up to 40-54% and a marked increase in SSI data quality.
In fact, DTCC recently published a paper entitled A Roadmap to Automation that provides guidance and information regarding the industry-wide benefits of increased SSI automation and a custodian managed model.
Is this something you have to sell to GCs or are they knocking on your door?
Our participating global custodians, and their clients, have seen real results and are taking an active position in driving the community to achieve a fully custodian managed automation model.
Is regulation a catalyst at all?
Regulatory compulsion moves the needle, without question. In particular, the Central Securities Depositories Regulation (CSDR) coming into fruition in 2020, introduces penalty fees for failing transactions and forced mandatory buy-ins where a failing participant does not deliver the financial instruments to the receiving participant within four business days after the intended settlement date. An optimal custodian managed SSI model reduces trade failures and is the solution to avoid those types of penalties.
Given that what you really want is for the custodians to manage the SSI data on behalf of their clients, what kind of oversight does DTCC maintain?
We work closely with the community and provide best practices in a variety of published materials such as our recent GC Direct Playbook and ALERT Settlement Instructions and Validation Rules, that are updated regularly to help with implementation and utilisation of GC Direct. Visit www.dtcc.com/SSIroadmap to learn more.
*Manual % derived from qualitative client feedback and analysis.