Custodian Participation is Necessary to Adopt a Standardized Central Utility Model for SSI Data Management, finds TABB Group Study

NEW YORK and LONDON, Sept. 26, 2016 -- Though the investment management industry has reached a point at which further progression to the utility model for standing settlement instruction (SSI) processing is inevitable, SSI data operations continue to be a cumbersome and expensive distraction for the buy-side. TABB Group’s latest research, “Standing Together: An Instruction to the Investment Industry,” reveals missing and incorrect standing settlement instructions were the cause of at least 20% of all trade fails, amounting to significant operations costs and risk exposures for investment management firms.

The research, conducted by TABB senior analyst Dayle Scher, is based on a survey of global investment management firms and reveals a unanimous opinion that the industry is poised to reap the hoped-for benefits of SSI centralization and standardization. Nearly 9 in 10 of the firms surveyed are already using a central utility model in some way, whether to maintain SSIs themselves or to outsource to their custodian or another third party.

According to the research, hurdles do still remain to realizing a stress-free SSI approach as investment managers choose between maintaining SSI data themselves or outsourcing to a third-party. Those who are managing their own SSI data are dissatisfied with their strategy, but due to the current state of custodian commitment are unable to change existing processes.

“Investment managers need custodians to reorient themselves around ownership of the SSI data management process in order to take full advantage of the central utility model,” explains Scher. “The reality is that most buy-side firms have little interest in directly participating in SSI data management and it is nearly universally understood that custody banks are the crucial link in maintaining the data.”

The utilities themselves are also under pressure to address key buy-side needs, such as speeding up cross-border interfaces and achieving critical mass in instrument and geographic coverage. TABB’s research details how these issues are being dealt with in a coordinated and methodical way.

“As utilities address these buy-side needs, it will be a significant step for the industry in adapting a standardized central utility model, and even more so when custodians take investment managers’ concerns to heart and step up on SSI maintenance. At that point the industry will be able to truly say it has definitively solved the SSI puzzle,” Scher says.

The 20-page, 8-exhibit report can be downloaded by TABB’s Research Alliance financial technology clients and pre-qualified media at https://research.tabbgroup.com/search/grid. For more information or to purchase the report, contact [email protected].  

About TABB Group
TABB Group is the international research and consulting firm focused exclusively on capital markets, founded on the interview-based research methodology developed by Larry Tabb. Since 2003, TABB Group has been helping business leaders gain a truer understanding of financial markets issues to develop actionable roadmaps and approaches to future growth. By accurately assessing their customer base, competition, and key market opportunities, TABB Group works with senior industry leaders to make critical decisions about their business. For more information, visit www.tabbgroup.com.

Contact:
Casey Sheets, TABB Group
+1 646-747-3207 / [email protected]