In a previous post, I described the importance of a financial trade order management system (OMS) and how to accelerate the data-intensive pre-trade validation process. In this post, I will show how GridGain provides similar benefits for the post-trade reconciliation process.
What is Post-Trade Reconciliation
Post-trade reconciliation occurs after trading hours, when financial institutions have records of trades made during the day and need to verify buyer and seller trade details, approve the transaction, change ownership records, and arrange to transfer securities and cash.
Post-trade reconciliation verifies the details of each transaction, which is essential given the amount of money at stake, the speed – often instantaneously – with which trades are executed, and the high possibility of errors when trades are made via phone calls. Even when trades are executed by computer, there is still a chance that small mistakes can lead to major errors.
Today, because of the pace and volume of trades, post-trade reconciliation presents firms with several challenges. Trade reconciliation can be extremely time-consuming, but it needs to be accelerated to meet current regulations and avoid financial penalties. Each trade requires multiple round trips to the database, creating significant latency, and the process must be completed for all the trades executed during the day for numerous security classes, including equity, options, foreign exchange, commodities, and futures.
For trading firms, any missteps or delays in this data-intensive post-trade processing pipeline is an existential risk that must be avoided. Yet as trading volumes accelerate across intraday, intercompany, and T+0 environments, ensuring that middle and back-office governance processes remain in lockstep has become an even more difficult task, creating significant operational and compliance risks related to errors, fines, and losses. Furthermore, regulatory requirements and SLAs around trade reconciliation that occurs during the same day as T+0 place additional pressure on the execution and performance of the post-trade reconciliation process.
Under the hood, compliance applications require automated and intelligent ways to reconcile the firm’s record of executed trades for the day with the end-of-day consolidated list received from the clearing firm. Intelligence is required to be able to align, for example, a firm’s order for 1,000 shares of a stock with the clearing firm’s record of executing four separate trades totaling the 1,000 shares. Computational requirements include validation according to fund prospects and government rules. And accurate reconciliation of trades must occur across multiple systems and technology platforms.
Meanwhile, many firms still grapple with systemic control vulnerabilities emanating from antiquated legacy architecture and an overreliance on employee-built applications, making it even harder to rapidly identify and remediate the complex reconciliation issues that occur.
How to Accelerate Post-Trade Reconciliation at Any Scale
Trading firms, stock exchanges, and hedge funds currently use the GridGain unified real-time data platform to reduce trade reconciliation time by over 85%. GridGain combines stream processing, a distributed in-memory data grid, and colocated compute to deliver data processing and analytics at massive scale and ultra-low latencies. GridGain’s “memory-first/disk-second” architecture minimizes disk I/O to provide ultra-low latencies across data sources while also providing disk-based durability. The platform’s horizontally distributed cluster with colocated data and compute also ensures scalability both on-premises and natively in public or private clouds, while still reducing overhead caused by movement of data over the network.
The GridGain platform can enable financial services firms to meet all the following requirements related to post-trade reconciliation:
- Streamline reconciliation processes through intelligent automation and reducing the need to repeatedly access databases
- Ensure trading and compliance applications can instantly scale as needed
- Automate and reduce the time required for the trade approval workflow
- Create a single foundation for end-to-end automation, validation, and reconciliation of data, controls, workflows, and reporting
- Reduce operating costs via straight-through processing
To learn more about how GridGain’s unified real-time data platform can accelerate post-trade reconciliation at scale, read this article for a quick primer, download this eBook, or contact us directly.