Automation matters more than ever in the liquidity markets______

Edward Lopez, Chief Revenue Officer

Could the COVID-19 crisis be a watershed moment for the liquidity market? With the move to home working now putting huge stresses on investors in liquidity funds, this could be the prompt the market needs to move to a fully automated model.

It could be given added impetus by the regulators’ increasing interest in operational resilience. That interest goes beyond traditional crisis planning. Regulators now want to see risk frameworks that identify the maximum tolerable disruption and evidence of robust processes that minimise vulnerabilities.

Remote Working accentuates complexity

For many treasurers there is more than enough complexity to the investment process in ‘normal’ times. It often involves multiple portals and other platforms, with cumbersome follow-up processes to determine execution certainty and access the post-trade data on which their treasury management system (TMS) depends.

There may be delays in getting the data and it often comes in varying formats. That can require time-consuming manual integration.

Managing these processes from home, while still interfacing with their TMS, is doubly challenging. It puts added pressure on communications and workflow management.

The number one priority for many firms during the lockdown is to manage cash. There is a premium on certainty and security – which can only come from having a complete and up-to-date picture of the firm’s liquidity.

And that is precisely what Calastone’s new, fully integrated and digitised model delivers – together with a hugely simplified trading process.

Reshaping and simplifying the funds ecosystem

The Calastone Money Market Service cuts out all the to-ing and fro-ing described above. It sends trade order information direct to the portal or fund manager delivers fund reporting straight into the treasurer’s TMS. It cuts out the delays associated with the traditional processes.

Integration means fund providers, portals, TMSs and treasury teams can all connect using their preferred connectivity method and avoid the need to manage multiple connections with different business partners.

All of this transforms the process of position management. Funds that are on the Calastone network can deliver fast, automated real-time reporting.  Investment information can be automatically combined and shared with the treasury team or made available via their TMS for download. In particular, this simplifies life for bank treasurers that need to conduct intra-day limit monitoring and compliance reporting.

With a flow of digitised data going directly into the TMS, treasurers can integrate multiple sources with ease. The risks inherent in manual inputting are eliminated.

Calastone also provides an automatic cash settlement capability which automatically instructs the money market fund investor’s bank to make payment upon order placement or redemption. This eliminates the need to rekey information between systems, reducing the scope for errors.

Regulatory pressure intensifies

The ability to reduce manual intervention and streamline the transaction process – while gaining real-time oversight and control – has much to recommend it in the current remote-working environment. But it should also be a primary goal in normal times.

Increasingly, financial regulators around the world are focusing on firms’ operational resilience. That focus is only likely to tighten once the present crisis is past.

The UK’s Financial Conduct Authority, for instance, has promised to review firms’, including Asset Managers, business resilience and their ability to support clients. Other regulators in the US, EU and Australia are similarly focussed.

This focus goes beyond business continuity planning. Regulators want to see evidence of a structured strategy that builds robustness into everyday processes and tests vulnerabilities on a regular basis.

Automation has an important role to play in building robustness. A fully digitised market ecosystem based on a proven network – such as Calastone Money Market Service – can offer immediacy, accuracy and certainty of execution, while driving out errors and costly delays. The risks and vulnerabilities inherent in the traditional way of doing things become a thing of the past.








Ed Lopez, President, Global Money Market Services

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