STP, which we define as:

 ‘fully automated hands-free processing of security transactions from the Fund Manager’s decision through to settlement reconciliation’,

continues to be one of the most significant challenges currently facing the Investment Management and Securities Processing industries. From the definition it is clear that STP is not merely a trade processing issue, although early benefits may be achieved through addressing the Trade Processing components.

Some firms have invested heavily in STP and are now reaping the benefits of higher levels of operational automation, but recent studies have highlighted a general lack of automation throughout the investment life cycle.   Industry STP rates as low as 15% have been identified in some firms for some processes.

Lack of automation has adverse consequences for trade failure rates, on timely and accurate cash management leading to heightened business risk and increasingly negative compliance reporting.   It greatly impedes a firm’s ability to deliver timely and accurate information.   Any growth in trading volumes, particularly cross-border, when aligned with the inherent limitations of manual processing mean the current deficiencies are likely to get worse.

Firms already using STP in their businesses are benefiting from more up to date and accurate information about their portfolios.   They are in a much better position to respond to the demands for more sophisticated, accurate and timely reporting from both clients, Fund Managers and regulators.

Our experience in researching STP issues has included working in partnership with client Investment Management firms to identify, project manage and implement successful STP solutions.   This has led us to develop an STP Model that helps identify and evaluate the key processes involved in the investment cycle and to determine the actions necessary to benefit from STP.

The A&A STP model for Investment Managers has been developed over a number of years and comprises the distillation of many consulting assignments successfully completed within the investment management industry along with personal experiences of operations in some of the largest international houses in London. In addition, feedback and input into the model has been sought from selected leading investment management organisations. We believe our STP model reflects best practice as it currently exists and is suitably structured to incorporate industry practice improvements as they are acknowledged.

The STP model detailed on the following pages provides a flavour of the full STP model. A&A Consultants are able to drill down into further levels of detail to support STP assignments within the industry.

Use of the model can accelerate the implementation of STP processes within an organisation as the model provides a framework on which to build. The model also maximises the probability of a successful implementation as it provides a baseline process flow that can be tailored to each organisation's individual requirements.