The difficulties of creating a central utility are preventing banks from getting a handle on their overall trading costs, according to a white paper from securities processing and outsourcing firm Broadridge Financial Solutions.
Most sell-side firms agree on the need for greater centralisation and automation to gain a holistic view of trading costs and thereby drive down outlay and improve efficiency over time. But many are thwarted in their efforts by the “challenges of creating a core utility linking various business functions and locations”. Broadridge added that both invoice transparency and data and fee accuracy were pre-requisites to an effective centralised system.
“Many of the challenges the industry faces around fee schedules are not new; however, there are increased complexities and regulatory pressures. We expect these trends to continue and will result in the need for an automated and centralised expense management utility that can provide a more holistic and data-driven view of the organisation. This approach will allow for improved accuracy and transparency that can drive greater efficiencies and cost reductions,” said Terence Faherty, head of product strategy for Broadridge’s revenue and expense management solution.
The whitepaper – ‘Key challenges and best practices in trade expense management’ – was based on a series of roundtables attended by operations, finance and technology professionals from leading global banks.
Trade expenses include fees across the transaction change, including brokerage, exchange, clearing and settlement charges, as well as the costs of FIX connectivity, middle- and back-office operations and market data. As well as centralisation and automation of trade expense management, the Broadridge white paper recommended banks try to negotiate global standardised agreements. Although this is not always possible, banks found that employing central teams to negotiate contracts yielded additional benefits in terms of information on where they ranked with vendors in terms of costs and volumes.