Despite T+1 ramping up the pursuit for overall automation, over half of firms are still opting to cleanse data using their own proprietary systems and internal staff, a report from Coalition Greenwich and Xceptor has found.
These players are choosing to use their own proprietary systems and internal workers to address challenges stemming from working with disparate systems, in their bid to achieve the highest straight-through processing rate.
The ‘Data Automation: The Workflow Efficiency Game-Changer’ report suggests that the time has now come to leverage the technology available to address the vast volume of data needing to be processed.
The alternative to outsourcing is a highly labour-intensive approach for firms, particularly when it comes to data linked to emerging products such as digital assets.
Specifically, the study showed that typically between one and five professionals are required to clean data internally, with twice as many staff members in some cases, as business units “throw bodies at the problem”.
The report highlighted that around 36% of respondents use manual processes to cleanse 10% or less of their data, with a correlation between the highest rates of manual cleansing (in some cases much larger than this 10%), and proprietary systems users.
Nearly a third of respondents are still using manual processes for data cleansing over 50% of the time, said Coalition Greenwich, with third-party platform middle- and back-office users more inclined to outsource the cleansing of – at least some of – their data.
Josh Monroe, chief revenue officer at Xceptor, highlighted the urgent need for intelligent data automation: “The industry’s struggle to manage and process the ever-expanding volumes of complex and unstructured data is concerning. This limits firms’ ability to automate and streamline their processes efficiently, particularly using in-house solutions. The need of the hour is to do more with less.”
Of those firms who do use third-party data cleansing solutions, almost 80% rely on these services for all of their data transformation, said Coalition Greenwich.
Despite a “notable” use of these solutions, “the majority of the market is still conducting up to 20% of its reconciliations offline using a proprietary solution. There is also more limited uptake for outsourcing data cleansing entirely.”
In the pursuit of effective solutions, the report found that 60% of the market uses at least one third-party system. However, this mixed approach of third-party and proprietary systems often results in major inefficiencies, according to the report, in turn requiring additional manpower to solve the issues which arise.
“With participants most often aggregating information from one to five different systems, there is more potential for multiple and duplicate data sources, and a corresponding need for effective cleansing and standardisation for downstream consumption.”
Read more: Data arms race heats up as venues and vendors eye buy-side business through new initiatives
Author of the report, Audrey Blater, and senior analyst for Coalition Greenwich Market Structure and Technology, highlighted the varying levels of success with this ‘mixed’ approach and stressed that scalable technology is the answer.
“Improving efficiency and accuracy across the trade lifecycle is essential for firms to reduce costs, lower the need for extensive resources and minimise risks. Many financial institutions are attempting to solve this with a combination of proprietary systems, internal staff, third party providers and manual processes, with mixed results.
“To accommodate market changes, evolving regulation and the ever-expanding data needs, robust, scalable technology for data automation and processing is absolutely crucial.”
The report also touched on the effect of T+1 in this vein. Ahead of the shift to T+1 from 28 May next year, there is a widely accepted readiness gap in the market, with lack of automation and streamlining of data cleansing and normalisation a key concern.
Just over 20% of respondents confirmed that they are not prepared for the new settlement time, with less than a third of participants believing the market has the capabilities in place ahead of the go-live date.
Read more: T+1 settlement: The seismic post-trade change impacting the trading desk
As the need to deal with multiple data sources is exacerbated, many respondents believe that medium and large firms will fare better in terms of positioning their staff and resources. Overall, a fifth of those surveyed do not believe the industry will be ready for the shift.
The TRADE’s sister title, Global Custodian, continues to run a T+1 industry issues forum in partnership with the ValueExchange whereby participants can submit their questions for a panel of industry experts to address in the near future.