By Todd Sloan
Failed trades occur when the seller or the buyer does not meet their trading obligations on or before settlement date. Whenever this happens, the party who failed to deliver cash or securities on their side of the trade could face financial losses, fines and damage to their reputation on the street. Failing to meet their trading obligations may result in rating agencies downgrading their credit score, limiting their ability to shop around for the best counterparty relationships, and paying higher penalties under new T+2 settlement regimes.
While automation can play an important role, many investment operations managers are still dealing with errors and delays that lead to higher operational costs and risks. What is the solution? First, let’s take a look at the reasons why trades fail and their effects on the health of an investment management firm.
reconciliation, failed trades, exception management, trade fails, settlement, investment management
By Todd Sloan
An investment manager’s post-trade operations environment generally evolves as the firm grows. Technology solutions are important for helping firms manage increased trade volumes, mitigate risk and lower costs. Operational efficiency is always the goal, but over time, siloed solutions used to manage a particular area of operations get in the way of reaching that goal due to the tendency to make solution choices according to organizational structures and processes already in place.
In hundreds of discussions with investment managers over the years, we’ve often discovered the existence of multiple reconciliation silos, little collaboration across teams, and limited visibility into the data needed to improve the situation. In order to find the best solution to the problem, first we must understand the full impact and significance of the problem on a firm’s business.
The Dangers of Operational and Reconciliation Silos
Electra Blog Posts, Buy-Side Technology, Operations Management, Reconciliation Solution, Electra Information Systems, reconciliation, Hedge Funds, fund administrator, Data Reconciliation, SEC Compliance, SEC, Investment Firms, automation, Investment Managers
By Doug Fritz
It’s natural to choose a familiar tool to make tasks easier, and turning to spreadsheet applications for calculations is no exception. In the investment management world, financial services teams, CFOs and operations teams often use spreadsheets for client fee calculation and billing. While the endless formulas, worksheet linking, and cross-tab capabilities may make spreadsheets a good choice at first, firms will quickly realize how much complexity and risk they end up creating.
Investment managers must be able to prove the accuracy of their calculations and how access to the data is controlled. When selecting the method for calculating fees and billing clients, care should be taken to ensure the platform provides flexible and consistent fee calculation, fee collection capabilities, audit tracking and data security, external system interfaces and analytical reporting. Hands down, spreadsheets offer limited ability to meet these requirements.
Here are six substantial risks investment managers take when they use spreadsheets for client fee calculation, billing and cash flow management.
Electra Blog Posts, Electra Information Systems, fund administrator, fee calculations, Electra Billing, Advisory Fee Billing, Investment Firms, Investment Managers
By Doug Fritz
It has been about a year since the U.S. Securities and Exchange Commission announced a risk alert that “Most Frequent Advisory Fee and Expense Compliance Issues Identified in Examinations of Investment Advisers.” Such inappropriate fee billing and expense practices may violate the Investment Advisers Act of 1940 and the rules implementing it, including anti-fraud provisions. Since the SEC announced the risk alert, there have been numerous fines and penalties charged to firms who have overbilled clients, whether intentional or not.
Electra Blog Posts, Buy-Side Technology, Electra Information Systems, fund administrator, fee calculations, SEC Compliance, SEC, Electra Billing, Advisory Fee Billing, Investment Firms, automation
by Todd Sloan
One of the most important responsibilities of the fund administrator is to calculate the fund net asset valuation (NAV). Before calculating the official NAV, the fund administrator must ensure the accuracy of the data by way of reconciling the investment manager’s data against that of the prime broker or custodian. Fund administrators are well-versed in the different ways that a NAV should be calculated and the need to agree with investment managers on the methodology to be used before posting an official NAV.
The question is, why does the investment manager need to reconcile the makeup and accuracy of their NAV if a service provider or fund administrator is already performing reconciliation? After speaking with several operations professionals across the hedge fund space, we identified four main reasons why an investment manager should shadow their service provider or fund administrator:
Electra Blog Posts, Buy-Side Technology, Reconciliation Solution, Electra Information Systems, reconciliation, shadow accounting, Hedge Funds, NAV, fund administrator, Data Reconciliation
by Todd Sloan, SVP Product Management
Most reconciliation solutions provide the data normalization and matching capabilities needed to identify and categorize exceptions. These features have helped buy-side firms to streamline post processing and improve the quality of financial records. However, the reconciliation process can become cumbersome when an exception is identified, and the investigation process begins. It is at this moment when different data sources (such as corporate actions, failed trades, collateral, missing funds, etc.) need to be accessed to troubleshoot a break and determine the root cause of an exception. The time and effort taken to open different applications and web pages, rummage through the information, and then research and manually compare results diminishes the productivity of the operations team or IT staff.
Electra Blog Posts, Buy-Side Technology, Operations Management, Reconciliation Solution, Electra Information Systems, reconciliation
Are you waving or drowning? With another regulatory deluge on the horizon for 2020, Catalyst is advising clients to begin working on CSDR as soon as possible.
Click here to see full article by Barry Cowan, Principal Consultant at Catalyst.
Catalyst, CSDR, Barry Cowan
FTF News by Eugene Grygo
John Landry, CEO of Electra Information Systems, talks to FTF News about industry issues and why the company won the Best Reconciliation Solution award for the third time in a row in 2018.
(Growth can be a double-edged sword for some securities firms as it will bring in new revenues and the potential for more profits. However, incumbent systems and operations will have to be adjusted to meet the new demands of the front office. So says John Landry, CEO of Electra Information Systems, in an interview with FTF News. The need to scale operations to manage the growing demands of portfolio managers and others in the front office has been a big driver for overhauls of reconciliation systems. Landry spoke to us about Electra's selection as Best Reconciliation Solution for three years in a row, and other matters.)
Why did Electra embark upon four major client-driven changes in 2017 — enhancements for pending trades, approval workflow, auditing and historical data accessibility, and event-driven reconciliation?
Electra views our clients as an extension of our own product management team and the features added in 2017 were the result of that partnership. Our clients identified areas of opportunity that could provide maximum time-saving for their staff and we worked closely with them to enhance Electra Reconciliation to address each.
Electra Blog Posts, FTF News, Reconciliation Solution, Electra Information Systems
Back to back awards confirm Electra as the industry leader
in providing post-trade outsourced services