RFP News

Published on Dec 28, 2009

Successful trading stories do not always begin from spending millions of dollars a year on technical support as many financial institutions do. Sometimes completely modest companies of Tier 2 or even 3 leave their competitors absolutely thunderstruck by creating strategies where automated and fast trade execution is supported by wise post-trade management, strong front to back-office integration and compliance technology in a very cost-effective way.

Current avid IT spending trend is pushing firms to achieve most possible top execution by the least means. This significantly hurts back office technology resulting in weaker post trade order management. Firm58 analyses challenges facing companies` back-office and front strategies today in the white paper “Unifying The Financial Enterprise”. The research shows that in most cases institutions lack well-thought-out, long-term solution for resilient post trade performance.

According to Firm58, effective post trade management solution should combine end-to-end integration throughout the transaction lifecycle; web-based, on-demand services; and on-demand access as well as visibility across all applications, systems, and accounts. Another crucial moment is the ability to unify the financial enterprise by creating a "system that automates and streamlines interaction among all global supply chain participants" including inside and outside parties like regulatory agencies.

As it shows the calculations from Yahoo! Finance, institutions investing in new back-end technology may significantly save expenses and increase net incomes. The table that Firm58 refers to in its white paper states:

“The financial industry’s average net profit margin is 13%, which means that a company with $100 in revenue would have $87 in expenses and net income of $13. Therefore, if $1 in expenses is saved, expenses decrease to $86, while net income increases by $1 to $14. Keeping the profit margin constant at 13% a firm would have to generate an additional $7.7 in revenue to achieve the same $1 net income increase. In other words a dollar saved in expenses equates to $7.7 earned in revenue.”

This simple math proves that even in tough economic climate companies can make both front and back ends meet focusing on post-trade performance as serious step to trading success.

By Helene Deborg

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