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Twists and turns on the straight-through route

The markets’ goal of next-day settlement of equities and bonds will only be achieved if there’s full implementation of straight-through processing. The more volumes continue to increase, the more urgent this becomes. Yet two rival systems have not agreed on common standards and sceptics fear that implementing full STP and T+1 settlement will be a decade-long project for cross-border trading.

Kevin Milne

Over the past year, straight-through processing (STP) has become something of a buzz phrase in the wholesale securities markets. Everyone talks of its importance, but progress toward the goal of 100% straight-through processing in trading has been slow and arduous, characterized by a lack of cooperation between the main technology players and foot-dragging on the part of many investment firms. Failure to cooperate between the industry leaders could hold the whole process back.

STP is needed for straightforward reasons. In a world of rapidly increasing trade volumes, shorter settlement times and shrinking margins, STP offers greater operational efficiency, less exposure to market risk and - for the proficient - opportunities to win new sources of revenue. The push to shorten settlement from a three-day cycle (T+3) to next-day settlement (T+1) in the US has accelerated the need to develop widely-accepted STP solutions.

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