SimCorp has issued a paper, entitled
‘Derivatives Processing – Managing the Entire Trade Lifecycle’
, that highlights the need for automation of over-the-counter (OTC) derivatives transactions for firms to cope operationally.
The company, which provides investment management software and services for the financial industry, said the paper outlines the challenges for buy-side firms as the use of OTC derivatives increases while the regulations that govern them become increasingly complex.
Implementation of regulations, such as the European Market Infrastructure Regulation (EMIR) and Dodd Frank, are underway raising a demand for centralised clearing services, collection and dissemination of trade data and trade execution through organised platforms.
These processes have new and complex operational requirements which many buy-side firms attempt to manage by using inadequate legacy systems, the paper explains. A recent SimCorp survey on the topic revealed that four out of five North American buy-side firms rely on work-arounds to support derivatives trading, compromising the accuracy of client reports in the process.
The paper also explores the benefits of state-of-the-art technology which allows for full automation of derivatives processing and eliminates the errors associated with the use of spreadsheets and manual processes. Without automated procedures in place, firms will find it increasingly difficult to achieve regulatory compliance, control operational costs and remain competitive.
The paper builds on an extensive report released earlier this year which investigates the dangers of investment firms operating with legacy technology, published by the SimCorp StrategyLab and available
The new paper on state-of-the-art derivatives processing can be accessed
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