TowerGroup: User Firms a Mix of Recs Contradictions
Financial services firms are a mix of contradictions when it comes to reconciliation, according to a new survey conducted by CEB TowerGroup Research. Executives responding to the survey say they have hope that there could be enterprise-wide reconciliation and exception management solutions. But they also admit that they use ad hoc efforts and have major gaps in their reconciliation coverage.The survey, funded by SunGard, finds that executives are battling operational immaturity and fragmented automation in their reconciliation environments, according to TowerGroup.
TowerGroup reached out to 117 senior operations and IT executives in Tier 1 and Tier 2 institutions, say officials at the research firm. The survey was conducted during the third quarter of 2013, and was aimed at firms with complex or diversified reconciliation needs, and assets under management greater than $100 billion.
The survey found that 70% of respondents embrace enterprise-wide reconciliation and that they keep an inventory of all their global reconciliation activities. However, more than one-third of survey participants, or 37%, is actually doing so on an “ad hoc, unscheduled basis, with large gaps in enterprise coverage of mainstream cash, payments and securities workflows,” according to the survey results.
The gaps are caused by high levels of functional, operational and technology fragmentation, say the researchers. More than half, or 51% of survey institutions, report that they have 10 or more different systems performing reconciliation functions. One quarter use more than 20 systems across their global enterprise.
These gaps are compelling executives to narrow their reconciliation focus, which could lead to many blind spots, says TowerGroup.
In general, executives are focusing on “a narrow subset of mainstream core activities and asset classes,” according to the report. “They report the highest amount of confidence in completing general ledger and balance sheet reconciliations, and the core reconciliation of cash, foreign exchange and securities.” A quarter of executives say that they do not have insight into custody and broker reconciliations, and 30% have no knowledge about how they reconcile mortgages, loans, derivatives and commodities.
Electra and Eagle Form Product Alliance
Electra Information Systems has entered into an alliance with Eagle Investment Systems that will allow Eagle clients to use Electra’s assistance for data collection, fee billing and trade notification, says Ian Danic, executive director for Electra. The new alliance builds upon long-standing working relationship between the vendors.
The agreement covers Electra’s: RecCollect DataPIPE, a data service for consolidated and normalized securities, cash position and transaction information from global custodians, brokers and sub-advisors; the Quantum fee billing and revenue management solution for fee calculation, invoicing and accounting; and the ACTioN post-trade toolkit for custodian trade and client notifications, confirmations/affirmations and settlement instructions — providing links among investment managers, custodians, prime brokers, clients and third-party participants.
“Having already tested those solutions with several mutual clients, we developed a more systematic approach through our alliance with Eagle,” Danic says. “The agreement provides us direct access to a wider pool of the buy-side and expands Electra’s global footprint, as Eagle has established offices in a variety of the key market hubs. As we’ve recently opened Electra’s London office, Eagle was the right firm to align ourselves with given their industry reach and well-respected reputation in the buy-side marketplace.
For its part, Eagle will be working with Electra “collaboratively and sourcing feedback from their client base,” Danic says. “As a result of this agreement, we will be taking in to account this information as we continue to enhance our solutions and product functionality.”
Are there development aspects to this alliance that will result in new products?
“There is nothing in the immediate pipeline, although we are certainly taking into account the enthusiasm of Eagle clients as we continuously evaluate our current offers and examine where enhancements can be made to the current functionality,” Danic says.
Asset Manager Uses Gresham for NAV Recs
Gresham Computing has deployed its reconciliation offering Clareti Transaction Control (CTC) for an unnamed “large asset manager based in London,” according to Gresham officials.
The asset manager will use CTC to reconcile its net asset value (NAV) calculations against the records held by custodians and prime brokers on a daily basis, say vendor officials.
As implemented, CTC is intended to highlight differences detected in the NAV positions between the firm’s internal systems and the records provided by custodians, Bill Blythe, global business development director, Gresham Computing, in a statement. “This will allow operational staff to focus their attention on investigating discrepancies and resolving exceptions.” The system should help with EMIR and Dodd Frank compliance.
The asset manager will be using CTC to manage future, additional reconciliation types, including cash, over-the-counter derivatives and credit default swaps, according to the vendor. The platform will also cover the handling of exceptions and provide an audit trail for all transactions.
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